MercoPress. South Atlantic News Agency

UK economy expanded 2.6% in 2014, the fastest since 2007

Chancellor George Osborne said figures showed the economy was “on track”, but warned the international economic climate was “getting worse”

The UK's economy grew by 2.6% last year, the fastest pace since 2007 and up from 1.7% in 2013, official figures have from the Office of National Statistics, ONS, have shown. The economy expanded 0.5% in the last quarter of 2014, which was a slowdown from the 0.7% of the previous three months.

 Economists were mixed over whether the loss of momentum in the final quarter might be temporary or prolonged. The ONS's chief economist, Joe Grice, said it was “too early to say” if this slowdown would persist.

“The dominant services sector remains buoyant while the contraction has taken place in industries like construction, mining and energy supply, which can be erratic,” he said.

But Nancy Curtin, chief investment officer at Close Brothers Asset Management, said the fourth-quarter figure “hardly set the world alight... and it's clear that [the economy] is slowing”.

She said: “There are clouds looming large on the horizon, and the general election is the biggest of these. Investors don't like uncertainty.”

The services sector grew by 0.8% in the quarter, but construction contracted by 1.8%. Manufacturing grew by just 0.1%, its worst performance since the start of 2013.

However Chancellor George Osborne said the figures showed the economy was “on track”. He warned that the international economic climate was “getting worse”, and so the government must continue with its economic strategy.

Shadow chancellor Ed Balls said the slowdown in fourth-quarter growth was a concern, and that “Tory claims that the economy is fixed will ring hollow with working people” whose “wages are down by £1,600 a year since 2010”.

The ONS figures are the first estimate of fourth-quarter UK growth and could be revised up or down as more economic data for the three months is gathered by the statistics office.

Economists at the Centre for Economics and Business Research (CEBR) said they “wouldn't be surprised if the ONS figures are revised up over time, painting a stronger picture for economic performance at the end of the year”.

The construction data which dragged down the fourth-quarter figures were “surprising and at odds with other indicators and surveys” which presented a healthier picture, the CEBR said.

The figures mean the UK was among the best-performing of the all the major economies in 2014. US growth figures are due to be published on Friday, with the International Monetary Fund (IMF) estimating expansion of 2.4% for the year.

The IMF forecasts UK growth of 2.7% in 2015. However, Samuel Tombs, of consultancy Capital Economics, has predicted growth of 3%.

“With the recent halving of oil prices providing a timely boost to households' discretionary spending power, credit still becoming cheaper and pay growth on an improving trend... the best days of the UK's recovery may still lie ahead,” he said.