George Osborne set for £55bn windfall as GDP rises

George Osborne set for £55bn windfall as GDP rises

Michael Saunders, UK economist at Citi, predicted that the Office for Budget Responsibility (OBR), the Government’s independent forecaster, will lower its deficit projections by £11bn this year, £19bn in 2014, and £25bn in 2015 when its latest UK outlook is published on December 4 to coincide with the Chancellor’s Autumn Statement.

Samuel Tombs, of Capital Economics, said this looked likely to be the best performance of the G7 nations. Over the six months to September, the UK grew at an annualised rate of about 3pc, the ONS said, above the 2.2pc trend.

“Britain is booming again, with the economy showing the most sustainable and robust-looking upturn since the financial crisis,” Chris Williamson, chief economist at data providers Markit, said.

The bulk of the growth came from the UK’s dominant services sector, which accounts for three-quarters of national output, but there was also a sharp rise in construction and manufacturing. Both sectors suffered a deep recession in the past two years, but have now been growing strongly for six months. Construction expanded by 2.5pc in the quarter and manufacturing by 0.9pc.

The economy could have grown 0.9pc had it not been for the steepest fall in gas and electricity production since 1994, the ONS said. Despite the rebound, the UK remains 2.5pc smaller than its pre-crisis peak in early 2008. The services sector has finally recovered all the lost output, and is now 0.4pc larger, but the construction and manufacturing sectors are still 12.5pc and 8.9pc smaller respectively.

The Chancellor would welcome a boost to the public finances. He is projected to borrow £78bn more this year than expected when the Coalition came to power, as the recovery turned out to be the slowest in more than 100 years. However, he has signalled that there will not be a tax giveaway.

“The Chancellor is unlikely to change fiscal policy significantly in the Autumn Statement,” Mr Saunders said.

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