UK economy grows by 2.6%

<p>The UK economy has grown at its fastest pace since 2007.</p>

The UK economy is growing at its fastest pace since before the recession, according to the latest official figures.

New data from the Office for National Statistics (ONS) showed that the economy grew by 2.6 per cent in the past year compared to the 1.7 per cent rise in 2013. The ONS stated that 2014's figure was helped by a 0.5 per cent boost in the final three months of the year. This was a slowdown from the 0.7 per cent growth in the previous three months but contributed to a recovering economy.

While the overall figure was encouraging, economists were concerned whether the sluggish movement in the final months of the year would be a permanent or temporary measure. When it came to specific areas, the services sector saw a growth of 0.8 per cent during the last quarter while manufacturing was up by just 0.1 per cent. Construction was hit hardest with a contraction of 1.8 per cent.

Joe Grice, chief economist of the ONS, said: "The dominant services sector remains buoyant while the contraction has taken place in industries like construction, mining and energy supply, which can be erratic."

Interest rates to rise?

As the economy continues its recovery, there has been increased talk around the future of interest rates. The current rates are set at their lowest level at 0.5 per cent but a top Bank of England policymaker has suggested they could rise earlier than expected.

Speaking to the Wall Street Journal, Kristin Forbes, one of the Bank's nine rate-setters, explained that there was a risk that inflation could rebound sooner than previously thought, increasing the need to raise interest rate.

Ms Forbes told the news provider: "If the risks that I’m focusing on to our last forecasts come through, I think there is a chance that inflation will pick up faster than people had been expecting in the medium term, which then would most likely merit an increase in interest rates sooner than people are currently expecting."

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