27/07/2011 02:41 BST | Updated 25/09/2011 06:12 BST

George Osborne Vows To Stick To Deficit Reduction Plan Despite Low Growth

PRESS ASSOCIATION -- Chancellor George Osborne has vowed to stick by his austerity measures despite a slowdown in the pace of the UK's economic recovery.

The Office for National Statistics (ONS) said the UK grew by 0.2% between April and June, compared with 0.5% in the previous quarter.

Year-on-year, the UK grew by just 0.7% in the 12 months to the end of June, which was the lowest rate of growth since the first quarter of 2010.

The ONS said the second-quarter figure would have shown growth of up to 0.7% if it had not been for one-off factors such as the extra bank holiday for the royal wedding and the disruption to British manufacturing supply chains caused by the Japanese tsunami.

Vowing to maintain his course of action to tackle the UK deficit, Mr Osborne said it was positive that the British economy was continuing to grow.

"Our economy is stable at this time because this Government has taken the difficult decisions to get to grips with Britain's debts. Abandoning that now, as some argue we should, would only risk British jobs and growth," he said.

However, a number of economists, unions and business leaders warned that the underlying picture was still of an economy struggling.

CBI chief economic adviser Ian McCafferty said it was clear the underlying economic recovery remains "fragile and difficult", while shadow chancellor Ed Balls called for an immediate change of policy, saying the figures were evidence the deficit reduction is not working. He repeated his call for the Government to reverse temporarily the VAT rise and get the banks lending to small businesses.

Another strong quarter in June from the critically important services sector helped to offset a dip in manufacturing and other production industries with business services especially strong. Construction output also increased after declines in the previous two quarters, though civil engineers said they had expected a stronger rebound.

Economists suggest the absence of one-off factors will help the third quarter, though they cautioned that even with that the Government's own growth target for this year is looking optimistic.