British economy slows amid royal wedding, Japan disaster

2011-07-26 15:32

London – The British economy, struggling to absorb deep budget cuts, showed weak official growth of 0.2% in the second quarter, held back by the royal wedding and earthquake turmoil in Japan.

A weak outcome had been widely forecast as the government pursues a strategy of tough budget measures to cut a huge budget deficit, in the belief this will eventually give the economy room to grow.

Gross domestic product expanded in the second quarter, or three months to June, after an increase of 0.5% in the first three months of the year, the Office for National Statistics (ONS) said.

However, the ONS warned that a series of one-off events had knocked as much as 0.5 percentage points off GDP in the second quarter – which would otherwise have registered growth of 0.7%.

“There were a number of special events in Q2 (second quarter): the additional bank holiday for the royal wedding, the royal wedding itself, the after-effects of the Japanese tsunami, the first phase of Olympic ticket sales and record warm weather in April,” it said.

Most analysts had forecast anaemic growth of about 0.1 to 0.2% in the second quarter, as the economy also struggled under the weight of state austerity measures, high inflation and flagging consumer sentiment.

The economy grew by 0.5% in the first quarter, but that only offset a 0.5% drop in the last three months of 2010, leaving activity broadly flat over the six-month period.

“The GDP report is weak, but not as bad as it could have been,” said IHS Global Insight economist Howard Archer.

“While the worst fears were not realised, growth of just 0.2% in the second quarter after flat activity in the previous two quarters combined is hardly a performance to celebrate.”

Britain has been hit hard by the coalition government’s deep public spending cuts and increases in taxation, and amid rising debt tensions in the euro zone, a key trading partner.

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