But despite claims by Chancellor George Osborne and Prime Minister David Cameron that the figures – a 0.5 per cent increase in growth– showed the economy is on the right track, Labour Shadow Chancellor Ed Balls said the weak figure meant that the economy has been flatlining for the past six months.
The figures give only a partial picture of what is happening to everyone’s finances as they take account of the VAT increase that hit purchases in the first three months, but do not take account of the cuts that are about to be felt throughout national and local government.While they show a modest upward trend in manufacturing and services, they also include a significant drop in construction activity as public sector projects dry up and confidence in the wider economy remains fragile.
The Office of Budget Responsibility had predicted a figure for the first months of this year of 0.8 per cent, so this week’s projection falls below that but in line with some of the more cautious financial institutions.In truth, anything below 0.5 per cent – and Mr Osborne would have been aware of the figures when he briefed the Cabinet earlier in the week – would have been terrible and anything between it and 1.2 per cent “merely bad”, according to several economists.
Mr Balls dismissed Mr Osborne’s claims that the country is out of the danger zone and said the reality is that Britain should have had growth of 1.8 per cent.Taken on average over the past six months, economic activity n Britain has been very weak indeed. If he had kept to original Labour plans, the OBR forecast would have been closer to 2.6 per cent, but instead demand is being taken out of the economy when it is most needed and will get worse, he warned. The economy was being choked off, Mr Balls said.
Construction saw a drop of 4.7 per cent while inflation is running at 4 per cent.
At the same time, lending figures released by British bankers suggested that businesses are borrowing – or failing to get loans – with a fall of £4.7 billion compared to a year ago.The British Bankers Association said businesses were trying to pay down debt and that weak trading meant they were less keen to borrow.Although the positive figure, compared to last year’s negative 0.5 per cent at year end, does give some cover to Mr Osborne and Mr Cameron it does fall short of what might reasonably have been expected as “bounceback” from what they said was an aberration and abnormally low figure.
However, as so often with official statistics in the past year the true picture is expected to remain distorted by the unusually high number of public holidays between April and May.
