OECD challenges UK downturn

Official government figures showing the UK economy heading for a downturn have been challenged by the OECD.

The more optimistic economic outlook emerged as George Osborne, the Chancellor, was told that any programme to stimulate growth by increasing infrastructure investment would be expensive and difficult without far-reaching reforms to the global financial system.

The latest assessment from the OECD, the Paris-based club of rich industrial nations, showed that the British economy continued to grow in the last three months of 2012.

That view was in contrast to data from the Office for National Statistics showing a 0.3pc fall in GDP in the final quarter of the year.

The OECD’s leading indicator for economic growth edged up from 100.5 in October to 100.6 in November (Xetra: A0Z24E - news) and 100.7 last month.

Economists pointed out that the OECD data are based on an assessment of the economic outlook rather than the detailed figures used to measure GDP. But they felt the indicators provided further evidence that Britain would avoid a triple-dip recession. The OECD economists cautioned that the signs were “slightly weaker” compared with the November interpretation.

Last week they said another round of quantitative easing would be warranted if the economy weakened.

The Chancellor is looking at more ambitious spending programmes to provide a stimulus but a report from the Group of 30, an economic think tank, suggests he may be underestimating the size and cost of the task.

Lord Turner, retiring chairman of the Financial Services Authority, is among members of the group to warn that shrinking bank balance sheets will make it more difficult to raise money to fund infrastructure projects.