UK growth bounced back in the first quarter of 2011 with GDP increasing 0.5 per cent, having shrunk by 0.5 per cent in the previous quarter.

Figures from the Office of National Statistics (ONS) show that GDP is now believed to be around the same level as it was in the third quarter of 2010.

Business services and finance growth increased strongly, up 1 per cent on the previous quarter making it the largest contribution to growth in real terms.

Transport, storage and communication companies increased output by 2.7 per cent, compared to a drop of 1.7 per cent in the previous quarter.

British manufacturing was up 1.1 per cent compared to a drop of the same amount in the previous quarter while total services output increased by 0.9 per cent in the first quarter compared with a decrease of 0.6 per cent in the previous quarter.

Ian Kernohan, economist at Royal London Asset Management (RLAM), said these figures will provide some relief for the government, given the risk of two negative quarters triggering double-dip recession fears.

He explained, ‘Following the weather-related slowdown at the end of last year, we might have expected a larger bounce back, however the gilt market was set up for an even weaker print than this, so there has been some selling.

‘In so far as we don't expect renewed recession, our view remains cautiously optimistic on prospects for growth in the UK, however growth will be somewhat weaker than the 3 to 4 per cent which normally occurs in the second year of a recovery.

‘We still expect a small increase in interest rates towards the end of the summer.’