The ONS confirmed yesterday that the economy grew by 1% during the third quarter of this year (July to September) compared with the same period of 2011.
Both the Olympics and the Queen’s Diamond Jubilee celebrations are thought to have boosted sales of food and drinks. Olympic ticket sales alone boosted gross domestic product (GDP) growth by 0.2% and benefitted a range of other services, including employment agencies, creative arts, office administration and accommodation.
While welcoming the news, the Institute of Directors (IoD), warned that tough times still lay ahead.
Graeme Leach, IoD chief economist, said: “The bounce back in GDP growth is good news but not enough to pop the champagne corks. More than half of the quarterly increase is attributable to the Olympics and the reversal of the Jubilee effect in the second quarter.
‘Not enough to pop the champagne corks’
“The key message is that we’re out of recession but uncertain where we’re going. Not for the first time, we need to heed the warning that you can’t see the road ahead through the rear view mirror.”
Growth was likely to continue in the fourth quarter (October to December) but there could be “a fallback”, he warned.
Prime minister David Cameron welcomed the news, declaring it was a sign: “We are on the right track. We have got the right approach.”
The British Chambers of Commerce (BCC) was also cautiously optimistic. Its chief economist David Kern said: “Both manufacturing and services have recorded increases over the quarter. However, the construction sector recorded another large decrease of 2.5%, meaning that the sector is more than 10% smaller than it was a year ago.”
Jubilee and Olympic ticket sales
Kern added that the GDP figures were distorted by the Jubilee and Olympic ticket sales. “Compared with a year earlier, the figures show that the economy is stagnant, with growth for 2012 currently at 0.3%, 3% below the level seen at the beginning of 2008, when the recession started,” he added.
John Longworth, BCC director general, said: “This news will give many businesses the confidence to invest. But the government still has work to do to ensure that an economic recovery is sustainable. There are still challenges ahead, with weak global growth and the ongoing eurozone crisis creating difficulties for many firms.”
Ministers must listen to calls from businesses to help them get the finance they need, and support to find new international markets for their products and services, he added. The government can put the UK economy firmly back on the road to recovery if it adopted the right measures over the medium- to long-term, said Longworth.
That included investment in infrastructure, the creation of a British Business Bank, and “meaningful” deregulation.
But David Cameron said the figures showed the government’s economic policy was already working. “We are on the right track. We have got the right approach,” said Cameron.
While he acknowledged the economy had “a long road to travel”, he insisted that the government and the UK had to “stick with the programme”.
GDP at a glance
- Largest quarterly increase since 2007
- UK leaves recession after three successive quarters of negative growth
- Olympic ticket sales increased GDP growth by 0.2%
- UK economy contracted by 0.4% in the second quarter, making the double-dip recession the longest since the 1950s.