LONDON BRIEFING:Ratings agency upgrade after strong GDP data gives beleaguered coalition timely boost

THE ECONOMISTS got it wrong once again, but no one really minded yesterday as the UK economy was revealed to have expanded by 0.8 per cent in the third quarter. Although a significant slowdown on the 1.2 per cent figure for the three months to June, it was double the rate forecast by most City analysts and, for the time being at least, eases fears of a double-dip recession.

Hours after the GDP data, Standard Poor’s leapt straight to the top of the coalition government’s Christmas card list with more good news. The ratings agency has revised the UK’s sovereign outlook from negative to stable and reaffirmed the nation’s coveted AAA status.

SP was the only one of the three major agencies to have the country on negative-watch but its timely confirmation of the UK’s triple-A rating was just the boost the government needed after last week’s savage spending cuts.

Chancellor George Osborne was swift to claim SP’s move as a vote of confidence in the government’s economic strategy, indicating approval of the austerity programme delivered a week ago and underpinning confidence in the recovery.

Good news on Britain’s economy has been hard to come by in recent months, so it might seem churlish to argue with a figure that so far surpassed the expectations of the City’s experts. But the 0.8 per cent growth rate reported by the Office for National Statistics (ONS) yesterday is, of course, only the first estimate of GDP and will be subject to revision in the weeks ahead as full data becomes available.

It is also worth taking a close look at how that 0.8 per cent is made up. ONS statisticians said the underlying state of the economy in the third quarter was pretty much the same as in the previous three months, with the figures skewed by exceptionally bad weather in the first quarter.

That particularly affected the construction sector, which was effectively on hold at the start of the year and contracted by a hefty 0.8 per cent in the first quarter. There was a big bounce-back in the building trade over the next few months – 9.5 per cent – which was largely behind the GDP growth figure of 1.2 per cent in the second quarter. Like yesterday’s figures, second- quarter data was far stronger than the City experts had forecast.

And it was construction that caught out the analysts once again in the third quarter, when it had been expected to fall back, but instead grew by 4 per cent. But construction accounts for only 6 per cent of the total economy, compared with around 75 per cent for the dominant services sector, which grew by a far less impressive 0.6 per cent, as did industrial production. It hardly makes for a firm foundation for economic recovery, particularly with the looming spending cuts.

“Stroll by the Stealth Bomber, carry on to the Cheesegrater then past the Walkie Talkie until you reach The Shard.”

It doesn’t have the same romance as directing someone from St Paul’s Cathedral to London Bridge via the historic Leadenhall Market and Fenchurch Street in the Square Mile, but it may well be how London tourists are given directions in the years ahead.

Two landmark projects in the City of London are now back on following a recovery in the commercial property market after the ravages of the credit crunch. On Monday, British Land took its £340 million, 47-storey Leadenhall Building project out of mothballs after partnering with a Canadian property company to construct what has become known as the Cheesegrater because of its design.

To be constructed on stilts, it will be one of the City’s tallest and most striking buildings since the now iconic Gherkin was completed six years ago.

Last week, it was announced that Land Securities’ 37-storey Walkie Talkie building (again, nicknamed because of its shape) in nearby Fenchurch St was back on too. And this Thursday sees the opening of the city’s first major shopping centre, One New Change, near St Paul’s and with a design apparently based on a stealth bomber. Construction of The Shard, meanwhile, is well under way at London Bridge.

Assuming nothing happens to diminish the new-found confidence in the commercial property market and return the skyscrapers to the drawing boards, the City’s skyline will be transformed by their construction in the next few years.

British Land and Land Securities appear confident, as neither the Cheesegrater nor the Walkie Talkie has been pre-let.

Not all the new buildings have won universal approval – Prince Charles has been typically sniffy – but as their nicknames demonstrate, they have already captured the imagination of City workers.

Fiona Walsh writes for The Guardiannewspaper in London