|Vince Cable today warned of “serious issues” facing the economy even though official figures showed that Britain escaped an unprecedented triple-dip recession.
The Business Secretary said that economic growth of 0.3 per cent in the first quarter of this year were “modestly encouraging”, but added that the recovery was a “marathon, not a sprint”.
Mr Cable said: “Today's figures are modestly encouraging and taken alongside other indicators such as employment figures, suggest that things are going in the right direction.
“However there is still a long way to go and some serious issues such as the systemic lack of bank lending to SMEs, the weakness in the construction sector and the need to press further on trade and exports. These issues all need to be addressed before people feel like the economy is genuinely starting to recover.”
In the days before the official growth number was published several City forecasters expected the Office for National Statistics would show the economy had shrunk during the first quarter.
John Mann, a Labour MP on the House of Commons Treasury Committee, warned that today's figures confirmed “the Japan-isation of the British economy”.
Mr Mann told the BBC: “In Japan, their economy stagnated - sometimes it went down to below zero, sometimes just above it, but it kept on this very low-growth trend and kept there for 15 years and it's been a disaster for Japan.
"We are in the same cycle and breaking out of it will need a change of policy. It's the trend that's the problem, that we have this continuous virtually-no-growth trend and we are falling further and further behind our competitors.”
However, some economists were upbeat about the better-than-expected GDP number.
Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said: “We’re optimistic that this will mark the beginning of a more sustained recovery after several false starts over the past eighteen months.
“The government’s various schemes around the housing market should help to stabilise the slumping construction sector, while struggling manufacturers will benefit from the weaker pound and emerging global recovery.
Consumers should also continue to offer some support, making use of the extra cash they’ve been given through the large increase in the income tax personal allowance.”
The services sector – which accounts for three quarters of the economy’s output, grew by a 0.6 per cent between January and March.
Hotels and restaurant performed well, and there was a 1.4 per cent pick-up in the transport and communications sector.
The output of the construction sector fell by 2.5 per cent. While this industry has been a persistent drag on the recovery, some economists were predicting this sector’s size would shrink by as much as 5 per cent.
Nevertheless, the economy still remains 2.6 per cent smaller than it was before the start of the economic crisis and growth this year is still widely expected to be no better than 1 per cent.
George Osborne, the Chancellor said: “Today's figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress. The deficit is down by a third, businesses have created over a million and a quarter new jobs, and interest rates are at record lows.
“We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future."