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Friday, 27 April, 2001, 10:09 GMT 11:09 UK
UK growth at two-year low
inside of factory
Manufacturing output dropped during the first quarter
Growth in the UK economy was 0.3% in the first three months of 2001, the slowest growth rate for two years.

The Office for National Statistics (ONS) said the UK's gross domestic product (GDP) was 2.5% higher compared with the year before - below analysts' expectations.

Economists said the news made it more likely for the Bank of England to continue cutting its interest rates.

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

Speaking in Washington, the Chancellor, Gordon Brown said:

"In the face of global instability, British economic policy is much better placed than it has been in the past, and we are on course to continue to deliver stability and sustained growth."

Many analysts now expect UK growth this year to fall to around 2.3%, compared to 3.0% in 2000.

However, in its latest economic forecast, published on Tuesday, the International Monetary Fund said the UK would grow at 2.6%- among the highest rate of all the leading industrial nations.

Foot and mouth effect minimal

The effect of the foot and mouth crisis in the first quarter of 2001 was "minimal", the ONS said.

Government agriculture experts said that output actually rose during the first three months of the year because of increased milk production.

But catering and hospitality saw a 'clear decline' in the period - as did recreation and cultural activities.

Growth in other sectors

There was modest growth in the communications industries, while the growth rate in computing and so-called 'other business activities' was strong.

The transport sector also grew modestly.

But manufacturing output actually fell in the first quarter, with high-tech industries particularly hard hit.

Mobile phone and telecoms network companies were most affected.

"The performance of the service sector suggests the manufacturing sector has performed weakly, and there is a risk manufacturing could slide into a technical recession," said Don Eggington at Daiwa Institute of Research.

Will the UK economy feel the impact of the US slowdown?

Economic indicators

Analysis

UK rate decisions
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27 Apr 01 | Business
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