UK economic growth unexpectedly revised up to 0.4%

The UK economy emerged from recession in the fourth quarter of last year at a faster pace than previously estimated, official figures have shown.

Data from the Office for National Statistics said the economy grew 0.4% between October and December in 2009.  This was faster than the previous estimate of 0.3% growth during the quarter.  The ONS said the upward revision was due to higher output from business services, construction and agriculture.

For the year 2009 as a whole, GDP contracted by 4.9%, the ONS said. The previous estimate had been for a contraction of 5% over the year. GDP in 2008 grew 0.5%.  Howard Archer, analyst at IHS Global Insight, said the GDP figures were "obviously a very welcome development".

"It suggests that the economy ended last year with a little bit more momentum than previously thought," he said. "But it still doesn't fundamentally change our view that recovery is likely to be gradual and bumpy going forward."

The government's temporary cut in VAT and introduction of the car scrappage scheme have in part helped the growth figures. But analysts said the better-than-expected data was also due to companies re-stocking at the end of 2009 after running down their inventories at the height of the recession.

However, government stimulus and the benefits of re-stocking will eventually slow, which is why analysts remain cautious about the economic outlook.

Jonathan Loynes, economist at Capital Economics, said the headline GDP numbers were good news. But he warned: "There are some less encouraging aspects to the figures too. Growth in Q4 was still heavily reliant on public spending and inventories, both areas which are likely to be weaker in coming quarters.  Overall, some welcome news. But the big picture of a fragile and unbalanced recovery is unchanged."

Separate figures showed Britain's current account deficit narrowed by more than expected over the quarter to £1.684bn from £5.912bn, the lowest since the first quarter of 2008.

Posted at 08:28PM Mar 31, 2010 by Kelly Board in The Economy  |  Comments[0]

Jarvis Staff Facing Job Cuts

About 1,100 jobs are to be cut at Jarvis by the administrators who are now running the rail maintenance firm.

Deloitte said that in the absence of further funding, it was not possible to continue operating parts of the group.

The redundancies will affect staff at the head office in York, as well as in Doncaster, Glasgow, Leeds, Newcastle and Peterborough.

Only the facilities management part of the group will continue trading as normal, a statement said.

There has been "a significant amount of interest" in this business, Jarvis Accommodation Services, Deloitte said.

The move means that Jarvis Rail, which is involved in rail engineering and Fastline, which supplies rail repair equipment, will cease operating.

Last week Jarvis, which employed 2,000 people, called in administrators after bank lenders refused further credit.

This followed the breakdown of talks with Network Rail over a proposal that Stan Herschel, regional organiser at the RMT union, said would have enabled the staff to continue rail renewal work.

Mr Herschel earlier told the BBC: "It is not as if extra money were needed. The contracts and the money for the work is already in place.

"We asked that Network Rail simply pay on time and underwrite the future work while Deloitte looks at the Jarvis business. If we don't do the work, someone else has to.

"The work must be done. It's a safety issue. The majority of the money Network Rail is spending on rail maintenance is, after all, taxpayers'." Mr Herschel said.

He said the RMT leadership was seeking an urgent meeting with Lord Adonis, the Transport Minister.

Last year, Jarvis's chairman, former Conservative MP Steven Norris, warned that a reduction in spending by Network Rail was hurting the company.

Network Rail rejected Mr Herschel's criticism. "We did not push Jarvis into administration. We are not responsible for their problems," said a Network Rail spokesman.

He added: "The maintenance work will be done, no question of that. It just might not be done by Jarvis. We have half a dozen similar contractors, and have no problem with them." Other contractors include Babcock and Balfour Beatty.

Network Rail is involved in a bitter industrial dispute with the RMT, with a strike planned for next week.

Jarvis came close to collapse in 2004 after running up huge debts on over-ambitious bids for Private Finance Initiative contracts.

The company had sold off several operations to concentrate on rail maintenance, leaving Network Rail as by far its biggest customer.

Posted at 01:57PM Mar 31, 2010 by Marc Stenton in Insolvency  |  Comments[0]