Britain avoided falling into a third recession since the 2008 global financial crisis after its economy grew by a better-than-expected 0.3 percent in the first quarter compared with the final three months of last year, official data showed Thursday.
In a significant boost to Prime Minister David Cameron's coalition government, gross domestic product (GDP) "increased by 0.3 percent in Q1 2013 compared with Q4 2012" when the British economy had contracted 0.3 percent, the Office for National Statistics (ONS) said in a preliminary estimate.
The technical definition of recession is two consecutive quarters of contracting economic activity.
"Today's figures are an encouraging sign the economy is healing," Chancellor of the Exchequer George Osborne said in response to the data.
"Despite a tough economic backdrop, we are making progress," the chancellor of the exchequer added in a statement.
The pound rallied in reaction to the data, though analysts warned against over optimism.
"It must of course be said that this is a preliminary reading and historically, preliminary GDP readings have proved highly volatile and subject to revisions in the second or final readings. Therefore, today's data should be taken with a pinch of salt," said Joshua Raymond, chief market strategist at City Index traders.
The positive GDP figure comes after Fitch last week stripped Britain of its top triple-A rating, moving it down one notch to 'AA+' amid fears that the government's austerity programme was hurting economic recovery.
The downgrade comes two months after rival ratings agency Moody's also stripped Britain of a triple-A debt rating, saying government debt was still mounting and that growth was too weak to reverse the trend before 2016. Downgrades can cause a country to pay higher interest for its debt.
"By posting a 0.3-percent quarterly expansion in the first quarter, the UK has managed to avoid a triple-dip recession," said Vicky Redwood, economist at Capital Economics research group.
"This will be a relief for Mr Osborne and the rise was also better than the 0.1-percent increase expected by the consensus," she noted.
The ONS added that Britain's economy expanded by 0.6 percent in the January-March period compared with the first quarter of 2012.
Growth was driven by a solid services sector, which grew by 0.6 percent in the first quarter thanks to strong performance by the retail, hotel and restaurant industries.
The production sector expanded by 0.2 percent, while the construction industry slid by 2.5 percent.
"Osborne can allow himself a moment of smugness following a much better than expected 0.3-percent increase in GDP," said ING Bank economist Rob Carnell.
"This is all the more encouraging because awful weather in the first quarter might have been expected to deliver a weaker result."
Thursday's data comes after senior member of the International Monetary Fund have called for Britain to slow the pace of its austerity programme.
David Lipton, the IMF's first deputy managing director, said on Saturday that the "pace of consolidation" should be reconsidered. Also last week, the IMF cut Britain's growth forecast growth for this year to 0.7 percent from 1.0 percent.
Britain's economy has been hit hard by both state austerity and the eurozone debt crisis. Though not a member of the eurozone, the country counts the single currency bloc as its main trading partner.