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The fascinating thing about today's growth data is what it tells us about the rather painful birth of a new type of UK economy.  Before the Crash of 2008, growth in the UK was largely driven by public spending, construction and business and financial services.  New Labour Governments lived with this quite happily by skimming off the tax revenues from the buoyant economic activity in these sectors and directing it into public services and tax credits.

The fascinating thing about today's growth data is what it tells us about the rather painful birth of a new type of UK economy.  Before the Crash of 2008, growth in the UK was largely driven by public spending, construction and business and financial services.  New Labour Governments lived with this quite happily by skimming off the tax revenues from the buoyant economic activity in these sectors and directing it into public services and tax credits.

While in opposition, George Osborne made a great deal of how this economic approach was now defunct and it was time to create a new "British Economic Model" based on a wider base of high growth sectors, an active but more constrained finance sector and much less public spending.

While the Treasury is making much of how buoyant manufacturing is and suggesting that this shows the UK is beginning to rebalance in the way Osborne wants, the data suggests something far more complex and less certain is happening. 

The story of the first quarter of 2011 is, in fact, one of a reasonable contribution to growth from manufacturing (0.1%) but a much more significant contribution from public spending (0.2%) and business and financial services (0.2%).  Over the last year, public spending and business and finance have contributed 0.3% each, while manufacturing has contributed 0.4%. 

The other big driver of the New Labour era was construction.  This is still the case currently with the building sector contributing 0.4% to growth in 2010.  But what is striking is the extraordinary volatility in this sector.  Construction has gone from boom in the second and third quarters of 2010 to recession with major shrinkage in the fourth quarter of last year and the first quarter of this.

So we cannot yet say that there is any sign of a really significant break from the New Labour approach yet.  What growth there is in the UK economy is still coming from business and finance, public spending and construction.  What is new is that manufacturing is making more of a contribution than it has historically but will probably need to do much more to suggest a real shift to Osborne's vision. And construction is highly volatile and, as such, deeply unpredictable.

The truth is the economic jigsaw pieces were jumbled up massively by 2008.  The data suggests we may have to wait quite a lot longer to see how they fall but for the moment signs of a completely new picture emerging are limited.

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