Business

UK economic growth revised up to 0.6%

UK factory
Image caption Analysts warn that the UK economy is still expected to struggle in the months ahead

The UK economy grew by 0.6% between July and September, official figures have shown, faster than previous estimates of 0.5%.

Growth was driven by strong performance in the service sector and construction.

However, the growth estimate for the second quarter of the year was revised down from 0.1% to zero by the Office for National Statistics (ONS).

The office also said the UK's current account deficit in the same period was £15.2bn, the highest on record.

The current account deficit is a broader measure of the trade deficit, and includes cash transfers such as interest income and workers' remittances.

The deficit was equivalent to 4% of GDP - the highest such ratio since 1990.

'Really hurting'

The ONS said the UK's economic growth in recent quarters continued to indicate a "fragile economic picture".

Since the economy started growing again in mid-2009 it has regained just over half of the output lost during the five quarters of contraction.

Despite the improved growth figure for the third quarter, analysts also warned that the UK economy was still heading for tough times.

James Knightley from ING told the BBC: "The sovereign debt crisis is really hurting [UK] businesses. We could turn back into recession in the next couple of quarters."

"We are are looking at flat growth in the current quarter, maybe a slight contraction of 0.1%. Early next year is key, when the debt crisis could come to a head - any [potential] credit crunch would be a massive constriction on the economy."

Howard Archer, chief economist at IHS Global Insight, said he felt that more action from the Bank of England was likely in the new year.

"It remains odds-on that the Bank of England will undertake further quantitative easing (QE) early in 2012 to try and boost the struggling economy," he said.

"We strongly expect the Bank of England to announce a further £50bn of QE in February, and believe that a further £50bn portion is highly likely to follow in the second quarter (most probably May). Meanwhile, interest rates seem set to stay down at 0.50% through to the second half of 2013 at least."

In its minutes published on Wednesday, the Bank of England explicitly left room for more QE. "Some members continued to note that the balance of risks to inflation in the November Inflation Report projections meant that a further expansion of the asset purchases programme might well become warranted in due course," the minutes said.

The British Chambers of Commerce (BCC) called on the government to do more to help businesses in light of the figures.

"While it is right for the government to persevere with measures to reduce the deficit, priorities within the overall spending envelope should be reallocated to help businesses create jobs and drive the recovery." said BCC chief economist David Kern.

"The positive messages in the chancellor's Autumn Statement must now be translated into firm action. An effective credit-easing programme should be implemented as quickly as possible, along with measures to reduce red tape, cut business rates and support exporters."