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Britain Dodges Recession As Economy Grew In Q1

Britain's government desperately wanted a robust number to justify its austerity policies, and seemed at least pleasantly surprised.

"Today's figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress," Treasury chief George Osborne said. "We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future."

The positive result â¿¿ however small â¿¿ can only offer a boost to the confidence of small and medium sized business, seen by many observers see as critical to reviving the moribund economy.

Stephen Pegge, a director for SME markets at Lloyds Banking Group, which makes loans to small and medium-sized businesses, said that the number of startups is rising, which is consistent with growth.

"Many businesses will feel more upbeat about the future as a result of today's figures," he said in an email. "My hope is that this optimism will stick and that businesses will be encouraged to borrow and invest for growth. Investment after all, is the only way to ensure growth is sustained."

The opposition Labour Party has pressured Osborne to ease off on budget cuts designed to reduce the deficit, which stands at 7.4 percent of annual GDP.

The International Monetary Fund has signaled it will judge Britain closely at an upcoming review and has suggested that the government might want to reconsider the pace of its austerity measures to help the economy, whose output was worth 1.4 trillion pounds ($2.1 trillion) in 2012.

A closer look at Thursday's figures showed the services sector contributed most of the growth in the first quarter but industrial production also helped. A sharp drop in construction offset some of those gains, though.

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