Business investment underpinned economic growth in Q1

ONS confirms that the UK economy expanded 0.8% quarter-on-quarter in the first three months of 2014

Economic recovery in the UK is being underpinned by growth in business investment, figures published by the Office for National Statistics (ONS) reveal.

It seems that after a difficult few years companies are spending again, since growth in business investment rose by 2.7% in Q1 compared with the previous three months. This is the fastest quarterly growth seen in a year.

Meanwhile, the ONS has confirmed that the UK economy expanded by 0.8% quarter-on-quarter in Q1 2014, leaving the level of output 3.1% above a year before.

The Centre for Economics and Business Research (Cebr) noted that growth in business investment is an encouraging sign for the long-term path of UK recovery. This is because investment is an important driver of sustainable growth since it helps to boost productivity.

Meanwhile, the outlook for investment in the short term continues to be positive, with the latest results from the ICAEW/Grant Thornton Business Confidence Monitor suggesting that private-sector businesses plan to maintain their current rate of investment over the year ahead.

But the UK's trade performance was weaker in the last quarter, with exports falling by 1% in real terms in Q1 2014 compared with Q4 2013. Weak growth in the UK's main trading partner, the eurozone, will make it hard to significantly increase exports this year.

Cebr expects GDP to rise by 3% over 2014 as a whole, suggesting it could be the fastest-growing G7 economy this year. With a rise in interest rates likely in 2015 and fiscal cutbacks necessary in the next parliament, this pace of expansion is expected to slow next year.

About the author

Sally Percy is editor of The Treasurer

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