UK economy soldiers on

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The British economy continued to expand in the first quarter of 2007, albeit at a static rate.

According to preliminary official figures Britain plc grew 0.7 per cent in the first three months of this year, consistent with data from the tail end of 2006.

The Office for National Statistics (ONS) says that today's figures mean the UK economy has grown by 2.8 per cent in the last 12 months.

The growth of the last quarter was again spurred on by the country's services industry, although the ONS noted a slight deceleration in the sector.

But the government says this slowdown was offset by a reinforcing in production and agriculture.

With inflation reaching a ten-year high earlier this month, the Bank of England is widely expected to raise interest rates a quarter of a per cent to 5.5 per cent in May, and economists say today's data will act as a rubberstamp to that decision.

"Confirmation of ongoing solid growth in the first quarter further cements a 25 basis point interest rate hike to 5.5 per cent in May," said Global Insight's Howard Archer.

"Growth is still modestly above trend, which will maintain the Bank of England's concern about capacity constrains and firms' increased confidence in their pricing power," Mr Archer explained.

"Indeed, there remains a very real risk that interest rates will have to rise further after May's certain hike."

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