UK economy grows at fastest pace for more than two years

The UK economy grew by 0.7% in the third quarter, as expected by City analysts, confirming that consumers and businesses remained resilient despite high oil and gas prices.

The Office for National Statistics said a jump in the cost of petrol, diesel and natural gas prices following the re-escalation of the conflict in the Middle East played an important role in restricting economic growth in the three months to the end of September.

In a boost to the chancellor, John Healey, the ONS also said the economy grew by 0.2% in September, though the ONS revised down the growth rate in August from 0.1% to zero.

Economists had expected month-on-month growth of 0% in September and a jump of 0.7% over the three months to the end of September.

Oil prices have dropped in recent days, but in September rose above $100 a barrel, remaining above that threshold until earlier this month. Natural gas prices were also about three times the level in February prior to the attack on Iran by the US and Israel.

The Office for Budget Responsibility said at the time of the budget in November that it expected the economy to expand by 1.2% this year, which already looks out of date as growth continues to exceed expectations.

Policymakers at the Bank of England voted last week to raise interest rates by a quarter of a percentage point to 4% to cool inflationary pressures in the economy.

Inflation has risen this year mostly in response to higher motor fuel prices, which in the UK have pushed the cost of petrol above £1.70 a litre and diesel towards an average of £2 a litre.