BRITISH CHANCELLOR of the exchequer George Osborne received a double boost yesterday after economic growth figures defied predictions that the United Kingdom is in danger of slipping back into recession and a debt rating agency decided to upgrade its outlook on the UK’s debt.

Growth figures published yesterday showed the UK’s economy grew by 0.8 per cent in the third quarter – twice the rate predicted by City analysts – despite recent industry surveys showing falling confidence among manufacturing and service companies, poor retail sales and falls in property prices.

Sterling jumped strongly against the euro and the dollar following publication of the figures.

The growth data suggest the Bank of England, which has given a series of signals recently that it was likely to embark on a new round of quantitative easing, is now less likely to inject more cash into the economy, particularly since inflation is running well ahead of its preferred targets.

The speculation that the bank was about to do so explains the recent significant fall in sterling.

Growth was particularly strong in construction, which grew by 4 per cent – although this marks a fall in the 9.5 per cent figure achieved in the second quarter – along with increases in transport and government services. The latter can be expected to suffer difficulties though when the full impact of the £80 billion (€91.4 billion) five-year spending cuts plan comes into force.

Manufacturing growth fell back to 1 per cent from the 1.6 per cent figure reported in the second quarter. Equally, increases in VAT due to come into force in January will further depress demand.

Standard & Poor’s, meanwhile, has upgraded its opinion on the UK’s debt from “negative” to “stable”, saying the decisions on budget cuts reduce risks, and has complimented the Conservative/Liberal Democrat coalition for showing “a high degree of cohesion in putting the UK’s public finances on to . . . a more sustainable footing”. Economist James Knightly at ING Bank said: “This is the second major GDP growth surprise in a row and suggests the UK economy is more resilient than many feared. The government will no doubt take this as a sign the private sector can fill the gap created by public sector cuts but with consumer confidence, hiring intentions surveys and housing activity data all softening, we remain cautious.”