* Q1 GDP growth slows to 0.2 pct q/q from Q4's 0.4 pct
* Labour, Conservatives swap jibes over recovery
* Sterling falls after weaker than expected outturn
* Retail, hotels and restaurants act as drag on output
(Adds quotes, details)
By David Milliken and Fiona Shaikh
LONDON, April 23 Britain's economy grew at a
slower pace than expected in the first three months of this
year as the harshest winter weather in 30 years hit hard,
official data showed on Friday.
The Office for National Statistics said GDP grew by 0.2
percent in the first quarter, half the 0.4 percent rate forecast
by analysts, who had expected a repeat of the pace of growth
seen in the last three months of 2009.
The figures gave the ruling Labour Party a chance to reprise
its charge that economic recovery remains too fragile for fiscal
tightening of the scale being proposed by the opposition
Conservatives in campaigning for a May 6 national election.
The data will also support expectations that the Bank of
England will hold interest rates at their record low rate of
0.5 percent until the strength of the recovery becomes clearer.
Sterling weakened by almost half a cent versus the dollar
GBP= and by a quarter of a cent against the euro EURGBP=.
Prime Minister Gordon Brown said recovery was under way but
it could be threatened by Conservative policies.
"The dangers of the Conservative policy of cutting ... 6,000
million pounds out of the economy as they propose for an
emergency budget in June are as grave as they are ill-judged,"
he told a news conference.
Conservative finance spokesman George Osborne, on Sky
Television, countered: "We now have this jobless recovery from
this weak government."
Year-on-year, GDP contracted by 0.3 percent, the smallest
decline since the third quarter of 2008.
Britain suffered its deepest downturn since at least the
1930s in the 18 months to September 2009, losing more than 6
percent of economic output.
The ONS said there was anecdotal evidence that harsh winter
weather, the worst in 30 years, depressed output from both the
retail sector and industry in the first quarter of this year.
"It is not a disaster but I think the overall story is that
this economy is not powering its way out of the blocks. This
reinforces my view that we are going to get a very sluggish
recovery," said Ross Walker, economist at Royal Bank of
For graphic on GDP, click on: r.reuters.com/sub29j
REVISIONS TO COME?
The 0.2 percent overall GDP growth was at the bottom of the
range of forecasts from a Reuters poll of 33 economists, and
analysts noted that the ONS's preliminary estimates of GDP were
frequently revised higher.
An initial reading of 0.1 percent growth for the last
quarter of 2009 eventually ended up at 0.4 percent.
"Over the last year or 18 months, markets have learned to
treat these first estimates with kid gloves," said Philip Shaw,
economist at Investec.
"It's true the snow did depress services and manufacturing
in the first part of the period ... it's likely that the
underlying pace of recovery is greater than these figures
Friday's preliminary data showed distribution, hotels and
restaurants -- which includes retail and makes up 15 percent of
the economy -- bore the brunt of the bad weather and contracted
by 0.7 percent, the biggest drop since the first quarter of
However, business services and finance -- which accounts for
30 percent of the economy -- grew by 0.6 percent, its best
performance in two years, providing the lion's share of total
GDP growth in the first quarter.
The overall service sector, three quarters of the economy,
expanded at less than half its pace of late 2009, growing by
just 0.2 percent in the first quarter.
While quarterly manufacturing growth slowed to 0.7 percent
from 0.8 percent, the broader industrial production measure grew
by 0.7 percent on the quarter, its strongest pace in four years.
(Reporting by David Milliken and Fiona Shaikh, editing by Mike