UK economy grows by 0.8% – the fastest pace in three years

Britain's economy is growing at its fastest rate in more than three years after a 0.8% increase in national output in the quarter to September.

The first stab at estimating the state of the economy from the Office for National Statistics found that activity had increased across the board with production, construction, services and agriculture all registering growth.

Despite the expansion – the second strong quarterly performance in a row – the level of gross domestic product remains 2.5% lower than it was when Britain's deepest post-war recession began at the start of 2008.

The ONS said national output had grown by 1.5% between the third quarter of 2012, when the economy was boosted by the London Olympics and Paralympics, and the third quarter of 2013. Output increased by 1.4% in agriculture, 0.5% in production, 2.5% in construction and 0.7% in services. The data is likely to be revised as more detailed information about the economy becomes available.

The chancellor, George Osborne, said: "This shows that Britain's hard work is paying off and the country is on the path to prosperity." The GDP figures were in line with City predictions and were the strongest performance since the Conservative-Liberal Democrat coalition came to power in the spring of 2010. Ministers believe the growth figures will enable them to seize the political initiative over the coming months, while Labour will insist that increased activity has not been accompanied by higher living standards.

Activity in the service sector, which makes up more than 75% of the economy, is now above its pre-recession peak, but output in construction and production remain more than 12% lower.

Howard Archer, UK economist at IHS Global Insight, said: "The GDP data are very encouraging, not only showing the growth rate picking up further to 0.8% quarter-on-quarter but also showing decent positive contributions from all output sectors. While the dominant services sector remains very much key to the economy's performance, it is important that manufacturing and construction achieve healthy expansion as well if sustainable robust growth is to occur."

Nancy Curtin, chief investment officer at Close Brothers Asset Management, said: "We now have further confirmation that the UK has shaken off the last vestiges of economic stagnation, placing George Osborne in a position of strength ahead of the autumn statement. With a strong reading from Q3 GDP, we can look forward to further growth, leaving previous fears of a triple-dip recession firmly in the shadows and undermining any further calls for more QE