Midlands business leaders hail GDP figures

THE UK’s Gross Domestic Product increased 1.1% in the second quarter of 2010, compared with an increase of 0.3% in the previous quarter, exceeding most analysts’ expectations.

Shadow Chancellor Alastair Darling said the figures ‘vindicated’ Labour’s approach before the party lost power in May, but Chancellor George Osborne said: “Today’s figures show the private sector contributing all but 0.1% of the growth in the second quarter, and put beyond doubt that it was right to begin acting on the deficit now.

“While I am cautiously optimistic about the path for the economy, the job is not yet done. “The priority now is to implement the Budget policies which support rebalancing and help ensure the sustained growth that the Office for Budget Responsibility forecast this year and next.

Louise Bennett, chief executive of the Coventry and Warwickshire Chamber of Commerce, said a sustained recovery still had to be nurtured.

She said: “These figures are better than expected and do bear out the fact that many businesses in Coventry and Warwickshire are more optimistic than they were 12 months ago.

“That said, the Government has only recently made a raft of cuts and they will not have filtered into the economy yet. So I would urge the Bank of England to keep interest rates low for the foreseeable future and for the Government to stick to its policy of trying to ease the burden on business.

“The private sector needs all the assistance it can get as we look to rebalance the economy and create the jobs of the future.”

The growth in the second quarter is due to growth across services, construction and production.

Total services output rose 0.9%, compared with a rise of 0.3% in the previous quarter.

The largest contribution to the growth in this quarter was from business services and finance. There was also growth in distribution, hotels and restaurants and in government and other services but transport, storage and communication declined.

Distribution, hotels and restaurants rose 0.7%, compared with a decrease of 0.7% in the previous quarter. Hotels and restaurants and retail contributed most to growth in this quarter.

Transport, storage and communication fell 0.7%, compared with an increase of 0.2% in the previous quarter. Land transport contributed most to the negative growth in this quarter.

Business services and finance rose 1.3% in the second quarter, compared with an increase of 1% in the previous quarter. Other business services contributed most to the growth in this quarter.

Will Rogers, policy adviser at Birmingham Chamber of Commerce, said: “Much of the growth came from the key services sector, which accounts for about three-quarters of the UK economy.  Business and finance posted its strongest rise in almost three years, up by 1.3 per cent over the quarter.

“These figures are from a low base so while this is positive news, many challenges remain. We shouldn’t take this at face value and the positives need to be sustained and built upon.”

Government and other services rose 0.9%, compared with a zero growth in the previous quarter. Health contributed most to the growth this quarter.

Total production output rose in the second quarter, increasing 1%, unchanged from the first quarter of 2010. Manufacturing made the largest contribution to the growth, where output rose 1.6%.

Electricity, gas and water supply output decreased 1.6%, compared with an increase of 0.4% in the previous quarter. Mining and quarrying fell 0.8%, following a decrease of 0.5% in the previous quarter.

Construction output rose 6.6% in the second quarter, compared with a decrease of 1.6% in the previous quarter.

Agriculture, forestry and fishing output increased 0.3%, compared with a fall of 2.2% in the previous quarter.