UK recovery weaker than thought
The UK's economic recovery has been weaker than previously thought, according to revised official figures today suggesting that growth this year could be lower than previously forecast.
Data from the Office for National Statistics (ONS) also showed the economy was increasingly reliant on household spending as business investment fades at its fastest rate in five years.
The revised figures showed that while third quarter growth was in line with earlier estimates at 0.7%, readings for the previous five periods have all been lowered.
Gross domestic product (GDP) in the third quarter was only 2.6% ahead of the same period last year, down from a previous estimate of 3%.
Meanwhile, Britain's ballooning current account deficit has soared to £27 billion, equalling a record 6% of GDP and described as unsustainable by one business group.
Samuel Tombs, senior UK economist at consultancy Capital Economics: "The latest set of national accounts leave the UK's economic recovery looking more fragile than it seemed before."
He said the revisions mean annual growth was likely to be 2.6%, lower than the official forecast which was recently revised up to 3% in Chancellor George Osborne's Autumn Statement.
The latest data present a pre-Christmas hangover for Mr Osborne after last week's economic figures painted a brighter picture with borrowing down and real terms pay picking up as inflation sank to a 12-year low of 1%.
The revisions mean the recovery is not as far advanced as previously thought, with the economy now 2.9% bigger than its pre-recession peak in 2008, rather than 3.4%.
Figures also showed that household spending increased by 0.9% in the third quarter, its strongest rate since the second quarter of 2010 and accounting for the lion's share of GDP growth in the period.
The data is likely to add to concerns about the unbalanced nature of the recovery, with business investment, though ahead year-on-year, contracting by 1.4% over the quarter - its worst performance since the second quarter of 2009.
Meanwhile, the UK current account deficit, which at 6% equals a record set in the third quarter of 2013, was dragged lower partly by a fall in direct foreign investment.
The trade deficit narrowed however, with an increased surplus from the services sector, though the goods deficit widened as exports fell. Overall trade was a downward drag on GDP for the first time since a year ago.
Shadow Treasury minister Shabana Mahmood said: "These are concerning figures. The Chancellor has totally failed to rebalance the economy as he promised."
The ONS data showed GDP for the first quarter of this year revised down from 0.7% to 0.6% and for the second quarter from 0.9% to 0.8%.
For 2013 it was revised up from 0.5% to 0.6% in the first quarter but cut from 0.7% to 0.6% in the second quarter, from 0.9% to 0.7% in the third quarter, and from 0.6% to 0.4% in the fourth quarter. However, for the year as a whole it was unchanged at 1.7%.
David Kern, chief economist at the British Chambers of Commerce, said: "While the quarterly results remain strong, the stark revision in annual growth confirms that the pace of recovery is slowing.
"The most concerning aspect of these figures is that the current deficit has risen to an unsustainably high level - due to the fall in net investment.
"Although the economy continues to grow, the recovery is not yet secure and further efforts are needed to boost business investment and to help businesses export to foreign markets."