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Osborne: UK economy is on right track

BRITAIN'S economy is "on the right track", George Osborne has insisted after the latest economic figures showed growth of 1% in the third quarter – boosted by the Olympics – meaning the longest double-dip recession since 1950 is officially over.

GEORGE OSBORNE: Warned there is still a long way to go.
GEORGE OSBORNE: Warned there is still a long way to go.

However, on the day car giant Ford announced 1400 job losses and the closure of two UK sites, there was a warning it was too early for the Chancellor "to contemplate singing in his bathtub" as Opposition politicians stressed the economy continued to flat-line as it had done since the Coalition came to power.

Labour and the SNP repeated their calls for an economic stimulus to boost jobs.

And Scottish business leaders noted how the Olympics, far from having boosted the Scottish economy, might have damaged it, which could mean Scotland's GDP for the third quarter might be comparatively worse than the UK's as a whole. The Scottish growth figure is due in January.

Earlier this month, a survey by the Fraser of Allander Institute painted a grim picture of the Scottish economy, showing that trading was down across several sectors and businesses were lowering their expectations for the next six months.

The 1% rise in GDP was larger than analysts had expected and was mainly due to a surge in the services sector, which makes up 75% of the entire UK economy. This grew by 1.3% following a drop of 0.1% in the previous quarter.

While industrial production also increased, by 1.1%, construction shrunk by 2.5% after a 3% fall in the previous quarter.

The Office for National Statistics, which released the data, pointed out how the bounce-back was largely driven by one-off factors such as clawed-back activity lost to the extra bank holiday for the Queen's Diamond Jubilee and a slight lift from the London Olympics.

It explained how the economy had contracted by 6.4% between the start of 2008 and the middle of 2009 but had since recovered half of that lost output.

Mr Osborne said: "There is still a long way to go but these figures show we are on the right track. By continuing to take the tough decisions needed to deal with our debts and equip our economy for the global race we're in, this Government is laying the foundations for lasting prosperity."

Prime Minister David Cameron insisted the growth figure showed the Coalition had the "right approach and we must stick with it".

For Labour, Ed Balls warned that, with the economy still flat-lining, borrowing up and living standards down, it would be "very unwise of David Cameron and George Osborne to just sit back, cross their fingers and hope for the best".

Ed Miliband, the party leader, said what was needed was a "proper long-term plan for a strong, sustained recovery".

Stewart Hosie for the SNP also cautiously welcomed the rise in UK GDP but stressed the country was still a long way from recovery and needed a "targeted fiscal stimulus".

Meanwhile, Lord Lawson, the former Tory chancellor, also expressed caution, describing the growth figure as "unreliable" and describing the economy as "more or less flat-lining".

Economist Howard Archer, from IHS Global Insight, said: "The economy is far from out of the woods with further relapses highly possible in the face of still tough domestic and global – especially eurozone – conditions. So it is premature for the Chancellor to contemplate singing in his bathtub."

Liz Cameron from the Scottish Chambers of Commerce pointed out that there was no boost from the Olympics north of the Border and, from the organisation's own survey, the 2012 Games might have had a negative effect on several sectors in Scotland.

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