UK growth revised upwards

The foot-and-mouth crisis has not affected UK growth

Britain's economic growth in the first quarter was stronger than originally reported, as the foot-and-mouth crisis failed to make an impact while the service sector continued to perform robustly.

The news boosted the pound against the dollar. Earlier in the week, worries about the UK economy had pushed sterling to a seven-month low against the US currency.

According to figures from the Office for National Statistics (ONS), the UK economy expanded 0.4% from the previous quarter, while year-on-year it grew by 2.6%.

The ONS had originally estimated quarterly growth of 0.3% and year-on-year growth of 2.5% a month ago.

The ONS analysis suggests that the foot-and-mouth crisis has had a "minimal" impact on output in the first quarter. Agriculture accounts for just over 1% of national output.

The upward revision to the growth figure was due to performance of the service sector, which was stronger than estimated and accounts for around two thirds of economic activity in the UK.

"The figures show a strong increase in services output," said Trevor Williams of Lloyds TSB.

"What's interesting is the fact that agriculture output rose on the quarter and the effects of the slowdown in tech stocks does appear to be coming through in lower output for electrical output."

"They suggest the UK economy remains robust, particularly on the consumer side."

Sector by sector

The service sector expanded 0.8% on the quarter to stand 3.7% higher than a year earlier.

Growth was strongest in transport, storage and communication, particularly in the telecoms sector.

But there was bad news for the manufacturing sector, which accounts for about a fifth of national output, as it continued to suffer from the slowdown in world markets and the strong pound.

Output slumped 0.7% on the quarter to be just 1.1% higher than the same quarter a year earlier.

Household expenditure, which is closely watched by the Bank of England, expanded by 0.6% on the quarter to stand 3.3% higher than a year earlier, the weakest annual expansion for four years.

Growth forecasts

The growth rate was still in line with government forecasts of growth this year of between 2.25% and 2.75%.

Britain's economy has achieved average growth rates of 2.25% over the past four decades although growth during much of the 1990s was above that level.

The pound, which on Thursday was at a six-month low against the dollar, strengthened on the news.