A rebound in North Sea oil production in the three months to May helped the UK double its growth rate to 0.6% from the first quarter of the year, handing the Treasury a much-needed boost.

According to the National Institute for Economic & Social Research (NIESR), output improved on the 0.5% in the three months to April and soared above the meagre 0.3% seen in the first three months of the year.

It said: “These estimates are consistent with a rebound of economic growth in the second quarter of this year. For the year as a whole, we forecast GDP growth of 2.5% per annum.”

The thinktank, which produces its forecasts ahead of estimates by the Office for National Statistics (ONS), said the acceleration in output during the spring and early summer put the UK on track for an interest rate rise by the Bank of England in the first three months of next year.

“We continue to expect the monetary policy committee to start raising interest rates in the first quarter of 2016,” it said, echoing most City analysts’ views.

Official data has shown a weaker recovery so far this year than the NIESR forecasts, but some economists said a strong recovery was possible after ONS figures showed industrial production rose 0.4% in April.

The Index of Production, a measure of Britain’s industrial output, was given a boost by an increase in quarrying and mining alongside a recovery in North Sea oil and gas. After a lacklustre beginning to the year, the ONS said the index increased by 0.4% after mining and quarrying jumped by 5.6% in April and oil and gas production surged by 8.7%.

North Sea output slumped last year with thousands of workers in Scotland laid off after the oil price halved in value.The oil price has recovered some lost ground in recent months and output has increased, making a positive impact on growth.

However, the all-important manufacturing sector suffered a drop in output during April, dealing a blow to the chancellor, George Osborne.

Manufacturing production dropped 0.4% between March and April to leave the sector’s output only 0.2% higher than last April. The main culprit dragging down output was the pharmaceutical industry, which fell more than 0.3% over the month.

The previous government singled out the pharmaceutical industry as one of the UK’s top-performing sectors and one that would enjoy unprecedented state support to improve skills and boost output. But even though several of the world’s largest pharma businesses are based in the UK, including GlaxoSmithKline and AstraZeneca, the manufacturing of drugs is shifting to Ireland, Spain and eastern Europe.

The chancellor said in his Mansion House speech on Wednesday that tackling Britain’s poor record on increasing productivity since the financial crash would be a priority for the government, which aims to rebalance the economy away from the City and property speculation towards manufacturing and exports.

So far, efforts to increase the UK’s skills base and encourage businesses to invest in the latest processes and equipment has failed to boost productivity.

The aerospace industry offset much of the decline in other areas of manufacturing, with a 15% rise between March and April. The volatile chemical industry reversed a 1.2% decline in March with a 1.6% jump in April.

Analysts blamed the drop in manufacturing output on a slowdown in global growth, made worse by a higher pound that has hit exports of manufactured goods.

Mike Rigby, head of manufacturing at Barclays, said: “The current appreciation in sterling is making it increasingly challenging for UK manufacturers to remain competitive and hold their profit margins. It’s particularly concerning given the UK is looking for a boost in exports to help rebalance the economy.

“For production levels to step up a gear, manufacturers need to differentiate their products on quality or service to hold margins and drive growth.”

Source: The Guardian