Olympics helps UK return to growth

Britain rebounded strongly from recession in the third quarter, posting its strongest quarterly GDP growth in five years, boosted at least in part by Olympics spending, official data showed yesterday.

Growth was subject to temporary factors, including the Olympics, which may mask a weaker underlying picture. But it was still much better than expected and may mean Britain’s full 2012 economy will not be in the red.

The Office for National Statistics said Britain’s GDP rose 1% between July and September, beating forecasts for a 0.6% gain, after shrinking by 0.4% between April and June.

On the year, the economy was flat, also better than expected.

The return to growth after three consecutive quarters of contraction was welcome news for a coalition government under pressure to do more to revive the economy.

The statistics office estimated that ticket sales for the London Olympics accounted for 20% of the quarterly increase.

Stripping out those one-off effects, economists said growth was weak and that the struggling eurozone was likely to restrict developments.

“It was a very good number, but understandably good,” said Alan Clarke, economist at Scotiabank, noting the lift from the ticket sales and what he estimated was about half a percentage point boost from the hit taken by an extra holiday in June.

“There’s now a good chance the economy won’t actually contract on average for this year... It’ll probably be flat and, in the context of monetary policy, it reinforces the case for the Bank of England to pause on quantitative easing.”

The statistics office said the economy had grown by 0.3% so far this year, but was still 3.1% below a peak in the first quarter of 2008.

Output in Britain’s service sector rose by 1.3% in the third quarter after falling 0.1% in the second.