UK economic growth revised up, buoyed by consumer spending

* UK Q1 economic growth revised up to 0.4 pct qq

* Consumers, business investment boost growth, trade a drag

* GRAPHIC: UK GDP http://r.reuters.com/cub87s (Adds reaction, graphics)

By Andy Bruce and David Milliken

LONDON, June 30 (Reuters) - Britain's economy enjoyed a stronger start to the year than previously thought, buoyed by big-spending consumers and an upturn in business investment, but weak exports continued to act as a drag on growth.

New (KOSDAQ: 160550.KQ - news) official data on Tuesday showed that over the past year, British households have seen a bigger boost to disposable income than at any time since 2001, as wages started to pick up and inflation fell towards its lowest in more than 50 years.

But export growth slowed, imports rose and poor returns on foreign investments caused Britain to run a far bigger current account deficit with the rest of the world than economists had forecast, barely narrowing from the record level seen in 2014.

Britons also saved the lowest share of their income since mid-2008.

"While the fall in household saving and huge current account deficit suggested that recent growth has relied on some temporary props, we remain confident that the UK is still on course for a period of strong and sustainable growth," said Samuel Tombs, economist at Capital Economics.

The Office for National Statistics said Britain's economy grew 0.4 percent in the first quarter, revising up an initial estimate of 0.3 percent growth.

A big revision to construction output in the first quarter announced earlier this month was responsible for most of the upgrade.

The ONS also pushed up its estimate for growth in year-on-year terms to 2.9 from 2.4 percent, a much stronger increase than economists had expected.

While the quarterly growth rate was only around half that seen in the last six months of 2014, most economists and BoE (Shenzhen: 200725.SZ - news) policymakers expect it to quicken later this year.

But they will nonetheless be keeping an eye on Britain's dismal balance of payments.

This has been pushed heavily into deficit by the low return on Britain's foreign investments -- many in the euro zone -- at a time when investments in Britain are generating healthy returns for foreign investors.

ALARM BELLS

The ONS said the current account deficit fell to 26.5 billion pounds ($41.7 billion) from an upwardly revised 28.9 billion pounds, leaving it much higher than expected and at a level which the British Chamber of Commerce said should ring alarm bells.

The ONS also bumped up its estimate for Britain's current account deficit last year to 5.9 percent of GDP -- the biggest since records began in 1948.

For 2014 as a whole, Britain's economy grew 3.0 percent, the biggest expansion since 2006. It is now 4.5 percent larger than its pre-downturn peak, though GDP per head of population is still 0.6 percent below its level in early 2008.

Real household disposable income rose in the first quarter at the fastest annual pace since 2001, growing 4.5 percent year-on-year. On the flipside, the household savings ratio slipped to 4.9 percent -- the lowest since mid-2008, the ONS said.

News that consumer confidence hit a 15-year high this month added to evidence that consumers are in the mood to spend. (Editing by Gareth Jones)