S&P lifts downgrade threat as British economy grows

BRITAIN’S economy grew twice as fast as expected in the third quarter and ratings agency Standard and Poor’s lifted the threat of a credit downgrade, a boost for a government under fire over steep spending cuts.

But the risk of a sharp slowdown in the first half of 2011 remains, with strong headwinds likely to come from tax rises, a patchy recovery in Britain’s main trading partners and cuts which may cost half a million jobs in the public sector.

The Office for National Statistics said Britain’s economy grew 0.8% between July and September, down from a nine-year high of 1.2% in the second quarter, but twice the 0.4% most economists had expected. Sterling jumped and gilts hit a one-month low as investors reckoned the combination of above-trend growth and above-target inflation meant the Bank of England would struggle to justify an expansion of its “quantitative easing” to support the economy.