* UK GDP grows at 0.8 pct quarterly rate in Q3
* Figures provide a boost to finance minister George Osborne
* Low wages and euro zone weakness may limit future growth
By William Schomberg and David Milliken
LONDON, Oct 25 Britain's economy picked up more
speed between July and September, growing at its fastest pace in
more than three years and building on an unexpected turnaround
that has buoyed the government.
Gross domestic product rose by 0.8 percent, faster than the
0.7 percent achieved in the April-June period, Britain's Office
for National Statistics said on Friday.
The quarterly growth and the year-on-year rate of 1.5
percent were in line with forecasts by economists in a Reuters
poll. The numbers also made Britain, until recently a laggard
among the world's rich countries, one of its fastest-growing
economies with an annualised growth rate of over 3 percent.
British government bond prices initially rose, reflecting
expectations among some investors that quarterly growth might
have been closer to 1 percent, but quickly fell back. The pound
strengthened slightly against the dollar and the euro.
Joe Grice, chief economist at the ONS, said quarterly growth
could have reached 0.9 percent but for weak gas and electricity
output. That was possibly a reflection of Britain's unusually
hot summer this year.
Samuel Tombs, an economist with Capital Economics, said
Britain's economy was unlikely to gather much more pace because
of wages that are rising less than inflation, more government
spending cuts and the dormant euro zone.
"But with employment growing, confidence returning and
productivity still well below its potential, it seems unlikely
that the recovery will fade significantly either," he said.
Britain's economy has staged a surprising recovery since
early 2013 when it avoided falling back into recession.
The turnaround has given a boost to Conservative finance
minister George Osborne, who defied calls from the International
Monetary Fund and the opposition Labour Party to bring forward
spending in order to get the economy off the ropes.
The government hailed the growth figures as proof that its
tough approach to public spending was paying off.
"Many risks remain, but thanks to our economic plan, the
recovery now has real momentum," a Treasury spokesman said.
The growth between July and September meant the British
economy expanded for three successive quarters for the first
time since 2011.
Nonetheless, unlike almost all other developed economies,
which have fully recovered output lost during the financial
crisis, Britain's economy remains 2.5 percent smaller than its
previous peak in early 2008.
Bank of England Governor Mark Carney noted on Thursday that
growth was coming from a low base, so Friday's figures are
unlikely to sway policy at the bank, which has suggested it will
keep interest rates at their record low of 0.5 percent for three
Earnings are lagging inflation, raising questions about the
sustainability of the recovery and giving ammunition to Labour
to attack the government in the run-up to a general election due
Friday's data showed Britain's giant services sector, which
accounts for nearly 80 percent of the economy, expanded by 0.7
percent from the second quarter and was now above its peak
before the financial crisis hammered Britain.
Growth in services was driven by the private sector, while
government services lagged behind, a reflection of Osborne's
push to curb public spending.
Manufacturing grew 0.9 percent, and construction, which has
begun to recover after a sharp contraction caused by the crisis,
expanded by 2.5 percent, the strongest in more than three years
as house building picked up, the ONS said.
Consumers, a key engine of Britain's economy, are feeling
increasingly upbeat, a separate survey showed on Friday.
A consumer confidence index compiled by market researchers
YouGov and the Centre for Economics and Business Research hit
its highest level this month since it was launched in April
The survey showed that expectations of higher house prices
were driving the increase in confidence; homeowners expected
their properties to be worth 2 percent more in 12 months' time,
almost double the expected gain in July's survey.
Critics of the government's economic policies say its
attempts to revive the housing market will not help bring about
the long-hoped-for rebalancing of Britain's economy towards more
manufacturing and exports.
The ONS's preliminary estimates of GDP are among the first
released in the European Union, and are based partly on
estimated data. On average, they are revised by 0.1 percentage
points up or down by the time a second revision is published two
months later, but bigger moves are not uncommon.