British Economy Rated Among Strongest in Eu

Gordon Brown was given a pre-Budget boost yesterday as the European commission rated the British economy one of the healthiest and strongest in the European Union.

In its latest assessment of EU finances, Brussels predicted that the UK economy would grow by 2.2% this year and by 2.6% in 2004. The predicted growth rate for this year is the third highest in the 15-nation bloc and more than double the expected eurozone average of 1%.

Commission estimates also showed that the rate of growth in the number of jobs likely to be created in Britain this year - at 0.5% - is second only to Spain and Luxembourg.

By contrast Brussels estimates that seven EU member states including Germany will see jobs disappear. At 5.1% Britain's projected overall unemployment rate in 2003 will also cheer the chancellor. It is the fourth lowest in the EU and compares favourably with 11.6% in Spain, 8.9% in Germany and 9.2% in France.

"The labour market has remained strong despite the global slowdown with the unemployment rate being at around 27-year lows," said the commission. "The British economy has weathered the global weakness rather well."

Inflation in Britain is also much lower than most other EU countries. At 1.9% this year the commission said it was "among the lowest in the EU" and was forecast to remain so for the rest of 2003 and 2004.

Despite the fact that the government is borrowing large sums to fund better public services, the commission's figures showed the amount of debt it is saddled with this year means it will have the third lowest level of debt in the EU.

Germany and France fare less well. Descriptions such as stagnation, low growth, deteriorating public finances and frailty peppered their reports.

Labour MEP Gary Titley wel comed the boost for Mr Brown but added: "The commission says that because we are more dependent on services than manufacturing we are more exposed to a downturn."

The commission estimated that - at 1.5% of gdp - Britain's projected current account deficit in 2003 puts it in the lower half of the EU in performance terms, with Germany, France and Italy all doing far better. It noted with concern that Britain would continue to run a deficit this year and next which it said was in danger of breaching the EU's 3% ceiling. An "abrupt" slowdown in consumer spending prompted by falling share values was a risk.

The commission identified four weaknesses in Britain: low productivity, the large number of working-age people claiming sickness and disability benefits, poor quality of public services and regional and socio-economic unemployment blackspots.

Low levels of basic skills and skill gaps among workers were also highlighted and Brussels called on the government to do more to tackle the gender pay and representation gap.

The government said: "The priority areas identified by the commission for future action are broadly similar to our own assessments."