British economy continuing to grow

Britain’s economy grew by 0.6% in the three months to May in a sign the recovery is gaining momentum, a leading thinktank said today.

The National Institute for Economic and Social Research (NIESR) said its estimated quarter-on-quarter hike in gross domestic product (GDP) was “the first real indication that the economy is growing at around its trend rate”.

NIESR’s May calculation comes after it said GDP rose 0.7% in the three months to April.

But the group warned that severe Government austerity measures to cut the public debt could hamper the path of recovery.

The debt crisis across Europe could also knock UK growth, with a strengthening pound adding to export pressure, according to NIESR.

It said that, while there had been “a clear improvement to UK growth”, there are “a number of factors which will impede growth in the coming months”.

NIESR said the UK was now in a period of “depression” – a period when output is depressed below its previous peak – which was likely to last for some time.

“We do not expect output to pass its peak in early 2008 until 2012,” it said.

Its estimates come ahead of the inaugural forecast from Chancellor George Osborne’s newly created Office for Budget Responsibility (OBR) on Monday at the start of a busy week for economic figures.

The OBR has been tasked with providing an independent assessment of the previous Government’s projections on the economy and public finances and to produce its own for the emergency Budget on June 22.

This is followed by a raft of economic indicators, including inflation and retail sales figures, unemployment data and the latest official news on public borrowing for May.