UK recovers with 2.6% GDP growth in 2014

The UK economy has recorded its fastest annual growth since 2007 before the onset of the global financial crisis, by expanding 2.6 per cent in 2014, up from 1.7 per cent in 2013, according to preliminary growth figures released by the Office of National Statistics (ONS) yesterday.

However, in the fourth quarter the gross domestic product (GDP) expanded at a slower pace of 0.5 per cent against economists' forecast of 0.6 per cent. The economy had expanded 0.7 per cent in the previous quarter.

Of the four main groupings, the services and agricultural sectors registered robust expansion, while construction and manufacturing activities contracted during the December quarter.

Output grew by 0.8 per cent in the services sector in the December quarter compared to 0.7 per cent in the third quarter, and agriculture output increased by 1.3 percent following a 0.5 per cent rise the previous quarter.

In contrast, construction activities shrank by 1.8 per cent following an increase of 1.6 per cent in the third quarter. Manufacturing posted a 0.1-per cent drop, its worst performance in the last two years. It had increased 0.2 per cent in the previous quarter.

The ONS's preliminary figures are based on available data which is subject to revision at a later date as more information is gathered by the statistics office.

Economists are divided over the future course of the economy, whether the loss of momentum in the last quarter would persist or not.

ONS's chief economist Joe Grice said, ''The dominant services sector remains buoyant while the contraction has taken place in industries like construction, mining and energy supply, which can be erratic," he said.

According to some economists, the British economy is slowing and looming elections could cause further uncertainty while some are hopeful that easy credit, plunging oil prices and rising earnings could be good for the UK consumers and economic growth should continue through 2015.

Chancellor George Osborne is more optimistic on the prospects for the country's economy. He said, ''These figures show the economy is on track.''

He warned that the international economic climate was ''getting worse,'' and so the government must continue with its economic strategy.

Commenting on the growth figures, IHS Global Insight chief economist Howard Archer told BBC, ''The main disappointment with growth in the fourth quarter was that it looks unbalanced on the output side of the economy at least.''

Archer said that IHS is largely upbeat about growth prospects for 2015 and expect the GDP to expand 2.7 per cent. However, he cautioned that there is the very real risk that growth could take a significant hit in 2015 from heightened political uncertainty in the run-up to May's general election weighing down on business confidence and investment.

Some economists are wary about the recent political uncertainties in the euro zone arising from the Greek elections which has brought the left-wing anti-austerity Syriza party to power.

Despite the weaker than expected GDP growth, Britain is still one of the fastest growing economies in the developed world in 2014 although complete comparisons are not available due to lack of data from other countries.

Compared to the euro zone majors, the UK is believed to be performing better as Germany is forecast to grow 1 per cent in 2015, France posting a mere 0.3-per cent growth in the third quarter after two consecutive quarters of flat or negative growth and Italy is reeling under recession.

However, the country's deficit is estimated to be about 5 per cent of the GDP this year compared to the US's 2.6 per cent.

According to latest forecast by the IMF, the UK economy is expected to grow 2.7 per cent in 2015, while the US is likely to expand 3.6 per cent.