UK economy grows 0.5% in fourth quarter

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The UK economy grew by 0.5% in the three months to the end of December, official figures show, taking the annual rate of growth for 2015 to 2.2%.

The Office for National Statistics show an improvement on the third quarter figure of 0.4%.

But the 2.2% annual growth in 2015 was down compared with 2.9% in 2014.

Output in the three months to December was 1.9% higher than a year earlier, down from 2.1% in the third quarter and the smallest increase since early 2013.

Despite the annual pace of growth being the slowest for three years, it still means the UK economy is one of the fastest growing developed nations.

The figure is in line with a recent forecast by the International Monetary Fund (IMF), which said the UK’s economy would grow by 2.2% in 2015, and for the next two years.

But the IMF also suggested that the robust growth of the past two years would not return until the global economy regained strength.

Whatever happened to the ‘march of the makers’?

Chancellor George Osborne closed his 2011 Budget speech by setting out his aspiration for “a Britain carried aloft by the march of the makers”.

Part of his vision for the future was an economy with a more prominent role for manufacturing.

How much has changed since then?

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Chris Williamson from research firm Markit said: “Uncertainty over ‘Brexit’, weak overseas growth and financial market volatility are all creating an unsettling business environment and point to downside risks to the economy in 2016.

“The coming year could easily see the pace of economic growth slow further from last year’s 2.2% expansion, and the chances are growing that we will see yet another year in which interest rates are left at their record low of 0.5%.”

Earlier this month, figures for November showed that UK industrial output had suffered its sharpest decline since 2013.

The Chancellor, George Osborne, recently warned that the UK was facing a “cocktail” of serious threats from a slowing global economy.

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George Osborne said Britain is “pushing ahead.”

On Thursday, while on a visit to the Airbus plant in Filton, Bristol, the chancellor said: “These GDP numbers show the British economy continues to grow steadily and despite turbulence in the world economy Britain is pushing ahead.”

Reliance on services

Ben Brettell, senior economist at Hargreaves Lansdown, said: “The bigger picture is that growth remains lacklustre, but reasonably resilient.

“Weaker construction and production output are the primary reasons for the slowdown, which could prompt concerns that the UK economy’s reliance on the services sector is increasing further.

“Production output declined 0.2% in the fourth quarter and construction was down by 0.1%, whereas the dominant services sector grew by 0.7%.”

Last week, the Bank of England governor, Mark Carney, said that he wanted to see above-average growth in the economy and a pick-up in wages before raising interest rates.

Many economists do not expect the central bank to increase rates until the tail end of this year.

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