Britain's economy expanded at its fastest pace in nine years in the second quarter of 2010 and growth at the start of the year was slightly stronger than previously thought, but analysts predict a tough road ahead. The robust expansion in the three months to June was bolstered by consumers using up their savings and a big rise in government spending ahead of a severe austerity drive which is likely to hamper the economic recovery.
The Office for National Statistics said on Tuesday the economy grew 1.2 percent in the second quarter, confirming an earlier estimate and in line with economists' forecasts. First quarter growth was revised up to 0.4 percent from 0.3 percent. That had little impact on financial markets, although sterling rose after separate data showed a surge in retail sales and that Britain's current account deficit narrowed more than expected in the second quarter.
The economy has bounced back strongly from its deepest recession since World War Two but most economists expect growth to slow sharply when planned government spending cuts start to bite. There are also concerns about weak global demand. Government spending grew by 1.0 percent on the quarter, its fastest rate since Q4 2008 and construction output surged 9.5 percent during the second quarter, its fastest rate of expansion since 1963 as it caught up after winter disruption. Industrial production grew an unrevised 1.0 percent on the quarter and growth in services output was revised down slightly to 0.6 percent from 0.7 percent.