UK GDP growth revised up back to 2001

LONDON, June 30 (Reuters) Britain has been understating its economic growth performance since 2001, official statisticians said on Friday as they raised their figure for the first quarter of this year.

Economists said the news increases the chances of a rise in interest rates from the Bank of England.

The Office for National Statistics said GDP grew by 0.7 percent in the first three months of the year, leaving it 2.3 percent higher than a year earlier.

Analysts had expected no revision from last month's estimate of 0.6 percent quarterly growth and 2.2 percent annual growth.

The chief reason for the revision was higher business activity.

Moreover, the ONS's annual reworking of economic history -- the Blue Book revision -- showed that GDP grew by 1.9 percent in 2005 instead of the 1.8 percent previously reported.

Growth in previous years was also revised up suggesting the degree of spare capacity -- one of the key sources of contention on the Bank of England's Monetary Policy Committee -- was even less than previously thought.

''The upward revisions to GDP growth since 2001 will increase the BoE's concern about the amount of spare capacity in the UK economy,'' said Howard Archer, economist at Global Insight.

''This increases the odds of an interest rate hike before the end of the year, although the MPC currently seem in no hurry to act and we belive that they will wait until 2007.'' The Treasury was quick to trumpet the higher growth, saying it showed how the economy had proven resilient to high oil prices and an end of the housing bubble.

''The detailed data show growth is becoming more balanced with business investment strengthening,'' Treasury minister Ed Balls said, according to to the text of a speech to be delivered later seen by Reuters.

Separately, the ONS released data on the balance of payments. The current account recorded a deficit of 8.3 billion pounds in the first quarter, slightly narrower than the 9.1 billion pounds seen in the fourth quarter.

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