British economy hit by royal wedding, Japan disaster

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Britain's economy, already struggling to absorb deep budget cuts, slowed to a trickle in the second quarter when output was also hit by the royal wedding and Japanese earthquake.

The economy narrowly turned in growth, with expansion of 0.2 percent.

The slowdown had been widely forecast as the coalition government pursues a strategy of tough budget measures to slash a huge budget deficit, in the belief this will eventually give the economy room to grow.

Following the latest data, British finance minister George Osborne launched a staunch defence of the government's policies, arguing that Britain was a "safe haven" amid a global debt storm in the eurozone and the United States.

"There's positive news today which is: the economy is growing and creating jobs, and crucially at a time when many other countries in the world are facing a lot of instability, we are providing stability in Britain and we are a safe haven in the storm," Osborne told Sky News.

He added: "There is enormous instability in the euro area, there is a big argument in the United States at the moment about debt, and here in Britain we have got a plan that has provided stability in a very unstable world and has brought our interest rates down -- and that has helped the economy grow."

However British gross domestic product (GDP) expanded only slightly in the second quarter, or three months to June, by 0.2 percent, the Office for National Statistics (ONS) said in a statement.

Analysts had forecast anaemic growth of about 0.1-0.2 percent in the second quarter, as the economy struggled under the weight of high inflation and flagging consumer sentiment.

The economy grew by 0.5 percent in the first quarter -- but that only offset a 0.5-percent drop in the last three months of 2010, leaving activity broadly flat over the six month period.

"The GDP report is weak but not as bad as it could have been," said Howard Archer, chief European economist at IHS Global Insight research group.

"While the worst fears were not realised, growth of just 0.2 percent in the second quarter after flat activity in the previous two quarters combined is hardly a performance to celebrate."

The ONS added that a series of one-off events had knocked as much as 0.5 percentage points off GDP in the second quarter -- which would otherwise have registered impressive growth of 0.7 percent.

"There were a number of special events in Q2: the additional bank (public) holiday for the royal wedding; the royal wedding itself; the after-effects of the Japanese tsunami; the first phase of Olympic ticket sales; and record warm weather in April," it said.

Most workers in Britain did not work on April 29, the day of Prince William's marriage to Catherine Middleton. Also during the second quarter, British manufacturing was hit by a shortage of parts arriving from earthquake-hit Japan.

Additionally, output was affected by Britons taking time off work to purchase tickets for next year's Olympics in London, while others basked in the sun.

The nation's sluggish recovery from a record recession that ended in 2009 has been hampered by spending cuts and tax hikes introduced by the coalition Conservative-Liberal Democrat government, which rose to power last year.

Opposition Labour politicians have long argued that the government is cutting back too fast and risks choking off the fragile economic recovery.

But Osborne added on Tuesday: "Britain has got to stick to its plan to deal with its debts because you see what happens to other countries that have not got a plan -- they have got themselves in to real trouble (and) there has been real instability."

© 2011 AFP

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