Economic figures revised upwards but Britain remains in recession

Britain did not slump as far into a double-dip recession as originally feared, revised figures have shown, although there is little reason for optimism.

The Office for National Statistics’ second estimate of gross domestic product (GDP) figures for the second quarter of the year was revised up from a contraction of 0.7% to a 0.5% drop.

The figures will not provide much cheer for chancellor George Osborne because it remains the biggest quarter-on-quarter fall for more than three years, leaving the economy in the longest double-dip recession since the 1950s.

Smaller falls than initially feared in the construction and production sectors helped to lift the figure, but the powerhouse services sector was unrevised at a contraction of 0.1%.

The UK’s trade deficit went up from £3.7bn in the previous quarter to £7.3bn as the eurozone debt crisis weighed on exports. This is the biggest fall since the third quarter of 2010, which cut 1% off the GDP figure.

Business investment also dropped for the first time in over a year.

“Britain is dealing with some very deep-rooted problems at home and a very serious debt crisis abroad, and that is why the healing of the economy is proving to be a slow and difficult process,” said a spokesman for the Treasury.

“Compared to two years ago, the deficit is down, inflation is down, and there are more private sector jobs.

“The government will continue to give its undivided attention to the economy – for example with recent announcements on infrastructure and lending.”

Construction fell 3.9% rather than the 5.2% initially thought, while production figures went up from a fall of 1.3% to minus 0.9%.

The improvements to the figures suggest the wet weather and the Queen’s Diamond Jubilee did not have as strong a negative impact on the economy as previously feared.

The extra bank holiday may have taken as much of 0.5% off GDP, economists believe, although the ONS said it was too soon to measure the effect.

Capital Economics chief UK economist Vicky Redwood said: “UK GDP was revised up in Q2 as expected, but the revision is very small in the big picture and means that output is still more than 4% below its pre-recession peak.

“Of course, the GDP figures may in the future be revised up further.

“Nonetheless, given the drags from the fiscal squeeze, eurozone crisis and high domestic debt levels, we still doubt that a strong recovery lies ahead.”