UK sees economic growth accelerate

The UK economy grew by faster than expected in the three months between January and March, figures from the Office for National Statistics show.

The economy expanded by 0.7% compared with the previous quarter – more than the 0.6% analysts had forecast.

The figures come after recent data showed inflation increased in March to hit an annual rate of 3.1%, and could add to calls to raise UK interest rates.

On an annual basis the economy grew by 2.8%, which was in line with predictions.

The latest figures revealed that growth in services had slowed slightly while mining and quarrying, energy supply and agriculture had all accelerated.

While the Bank of England opted to maintain interest rates at 5.25% at its meeting in April, it is widely expected that rates will rise to 5.5% in May.

“In an environment of strong growth and with inflation above 3% a Bank of England interest rate rise in May looks inevitable,” said James Knightly, an analyst at ING.

“However, we believe that we may be at or close to the peak in UK growth,” he added. “Manufacturing and service sector surveys suggest that growth has stabilised and may actually start to soften.”