27th July 2011
The report adds that analysts predicted the Treasury would be forced to cut its growth estimate after gross domestic production data showed that activity increased by just 0.2% in the second quarter of 2011 – after flatlining in the previous six months.
Despite the bad news, a report in the Daily Telegraph adds that George Osborne is in "total denial" over the economy's failure to gather momentum.
In speaking to the BBC, the Chancellor stressed there would be no compromise and no tax giveaways. "The absolutely fundamental requirement is economic stability. Without that you have nothing," he said. "Would we really take the risk of yet more debt? Would we risk the sky-high interest rates, the economic instability? I think most people would think that is an absolutely mad course for us to head down.
"Abandoning that now would only risk British jobs and growth."
Economists argued that the Chancellor was only able to hold his line because underlying growth in the second quarter was stronger than expected.
However, Mindful Money blogger Simon Ward isn't as pessimistic as some city experts following news of the GDP figure. "These figures understate the economy's underlying progress because of a big fall in North Sea production and special factors that depressed the second-quarter outturn – the royal wedding bank holiday, disruption due to the Japanese earthquake / tsunami and Olympic ticket sales that will not be recorded in the national accounts until the third quarter of 2012. Without these effects, GDP would have risen by 0.8% last quarter and by 1.6% over the last year." Read more here .
Yet data from the Office for National Statistics (ONS) showed the level of activity still almost 4% below the peak in early 2008, with no sign of the rebalancing of growth towards manufacturing and exports predicted by the government.
UK economic growth was affected by cold weather now it is affected by warm weather too! – from Mindful Money economist Shaun Richards