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Business investment rises as economy grows

UK business investment rose 2.4% quarter-on-quarter in the final three months of last year, official figures have revealed, fuelling hopes that the recovery might be becoming less unbalanced.

The rise in business investment was revealed in the latest gross domestic product (GDP) figures, published yesterday by the Office for National Statistics (ONS).

These figures confirmed the UK economy grew by 0.7% in the final quarter of 2013 - the pace of expansion reported by the ONS in its initial estimate of fourth-quarter GDP last month.

But UK growth in 2013 as a whole was revised down yesterday, from 1.9% to 1.8%.

UK GDP in the fourth quarter was 1.4% adrift of its peak in the opening three months of 2008, ahead of the recession.

This contrasts with the position in some other major developed economies, such as the US and Germany, in which output is above the pre-recession peaks.

The Bank of England has been among those to highlight the unbalanced nature of the UK recovery, which has been driven in large part by growth in spending by consumers who are already carrying relatively large debt burdens.

Chancellor George Osborne's vision of "a Britain carried aloft by the march of the makers" has failed to materialise.

Although the figures for the most recent two quarters are more encouraging, businesses have not invested as the Coalition had hoped.

Business investment rose by 2% in the third quarter of last year.

Net trade made a positive contribution to UK GDP growth in the fourth quarter. This in large part reflected a 0.9% fall in imports. Exports edged up by 0.4% in the fourth quarter, having tumbled by 2.8% in the preceding three months.

Household spending grew by 0.4% in the fourth quarter, yesterday's figures showed.

It had risen by 0.9% in the third quarter, fuelling a 0.8% rise in GDP in that period.

Bank of England Governor Mark Carney said: "As yet, the recovery is neither balanced nor sustainable. A few quarters of above-trend growth driven by household spending are a good start, but they aren't sufficient for sustained momentum.

"Activity is still below its pre-crisis level. Wage growth remains weak and the household savings rate is likely to fall further. The pick-up in business investment is still in its earliest stages."

Howard Archer, chief UK economist at consultancy IHS Global Insight, said of yesterday's GDP data: "While GDP growth may have slowed marginally to 0.7% quarter-on-quarter in the fourth quarter of 2013 from 0.8% in the third, the growth breakdown looks more broadly-based and healthier."

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