UK economic growth revised upwards

Construction has grown faster than expected

The British economy grew slightly faster than previously thought in the second quarter, according to the latest figures from the Office for National Statistics (ONS).

The numbers are better than expected

Ross Walker, Royal Bank of Scotland

Gross Domestic Product (GDP) grew by 0.4% from April to June compared to the first three months of the year, up from previous estimates of 0.3%.

This means that the economy is growing at an annual pace of 2.3%, higher than the previous estimate of 2.1%.

The revisions were due to faster growth in the services and construction sector than earlier thought.

Although the figures cover a period prior to the recent attacks on the United States, they provide further evidence that the UK is not on the brink of recession.

Current account deficit

Even after the US terrorist attacks, many economists are predicting that the economy could grow by close to 2% this year as a whole.

Separate figures showed that the current account of the balance of payments deficit widened to £3.9bn in the second quarter from £1.6bn in the previous quarter, a better figure than expected.

The data is unlikely to make any difference to the Bank of England's interest rate policy.

ONS also released its annual "Blue Book" containing revisions to past data, including a new growth figure for the full year 2000 of 2.9%, lower than the 3.1% previously given.

Analyst reaction

Ross Walker, of the Royal Bank of Scotland, said: "The numbers are better than expected.

"Both GDP and the Balance of Payments are to some extent ancient history, covering the period pre 11 September.

"They show the economy fairly unbalanced, with consumption strong and investment weak.

"Services sector output has been revised up which is encouraging but manufacturing is still weak.

"With further rate cuts likely, the chances are the imbalances are going to worsen."

Arjun Mittal, of the American Express Bank, said: "The two-speed economy is likely to continue as we go forward but the emphasis will be on the Bank of England needing to cut rates further because of what's happening in the global economy."