THE UK economy grew at the fastest pace in 11 years in the second quarter but doubts remain over whether the momentum of recovery can be sustained.

The economy grew by 1.2 per cent in the quarter rather than the 1.1 per cent first estimated, but comes after the UK’s sharpest recession since the 1930s.

Growth was driven by a pick-up in household consumption and a large swing in inventories that came as companies restocked their shelves following the downturn. Inventory growth added 1 percentage point to growth and is at its highest since 1994.

The hard-hit construction sector grew at its fastest pace in decades. Service sector growth was less pronounced, while higher government spending made up only a small part of the overall increase in activity.

While optimists will look to the record pace of growth as evidence that the economy is on the right track, the figures also provided ample evidence the outlook is less rosy.

Taking the first two quarters of 2010 together – because bad weather and a rise in sales tax may have delayed some activity in the first three months – growth was a little above the UK’s long-term average, at about 0.75 per cent a quarter.

With the impact from stock building likely to be fairly short-lived, and the weak pound failing to boost exports, economists fear government spending cuts, which will be harsher over the next two years, may hit the economy hard.

The government argues that the rapid growth in the second quarter shows the economy is strong enough for more rapid public spending cuts.

However, Ed Balls, a candidate to lead the Labour Party, said yesterday the coalition’s plan to cut spending sharply in the next parliament would undermine the economy at a time when “the second storm looms on the horizon”. Mr Balls claimed the upgraded growth figures were due to the fiscal stimulus package adopted by Gordon Brown’s government. – (Copyright The Financial Times Limited 2010)