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Britain’s economy in 2013 recorded its fastest annual growth since the financial crisis despite a slight slowdown in the last three months of the year, official data showed yesterday.

Supporting expectations for a bright 2014, Britain’s gross domestic product rose by 0.7 per cent in the fourth quarter, the Office for National Statistics said – in line with economists’ forecasts for a small reduction from the third quarter’s pace.

This rapid rate of growth – which is above Britain’s long-run trend – is likely to increase speculation about when the Bank of England will raise record-low interest rates.

BoE Governor Mark Carney has said there is no need for rates to rise anytime soon, as Britain’s total output is still well below pre-crisis levels. But unemployment has fallen far faster than the bank forecast in August, raising questions about what long-term inflation pressures might be building in the economy.

Yesterday’s quarterly GDP figure took Britain’s full-year growth for 2013 up to 1.9 per cent from just 0.3 per cent the year before. This is the highest since 2007, although total output is still 1.3 per cent below the pre-financial crisis peak reached in the first three months of 2008 – a weaker situation than in almost all other big advanced economies.

A long list of economic indicators over the last few months have suggested Britain’s economy is recovering faster than either policymakers or independent forecasters predicted.

This rapid rate of growth is likely to increase speculation about when theBank of Englandwill raise record-low interest rates

Data from the Confederation of British Industry released earlier yesterday suggest 2013’s strong growth had continued into January.

Figures last week showed British unemployment plunged to within a whisker of the Bank of England’s level for considering an increase in interest rates, but the central bank stressed it would be in no rush to act.

Yesterday’s figures will also be a boon for Britain’s coalition government.

With growing evidence the recovery is gaining strength, opinion polls for the 2015 election suggest the Conservative-led government still lags behind the Labour opposition, which says Britons have been hurt by the rising cost of living.

Output in Britain’s service sector – which makes up more than three quarters of GDP – rose by 0.8 per cent in the fourth quarter, maintaining its pace from the previous months, which was the fastest in a year.

But industrial output growth slowed to 0.7 per cent from 0.8 per cent, as the strongest manufacturing growth since the third quarter of 2010 proved insufficient to offset falling North Sea oil and gas output.

Construction – which accounts for less than eight per cent of GDP – fell by 0.3 per cent, reflecting a weak November.

A survey on Monday showed British households have a growing sense of job security and declining fears that inflation is driving prices higher.

So far, the recovery has been fuelled by consumer spending and an upturn in the housing market, although BoE policymakers over the last week have said they expect business investment to begin making a contribution later in the year.

Critics of the government’s economic policies say its attempts to revive the housing market will not help bring about the long-hoped for rebalancing of Britain’s economy towards more manufacturing and exports.

The ONS’s preliminary estimates of GDP are among the first in the EU, and are based partly on estimated data. On average, they are revised by 0.1-0.2 percentage points up or down by the time a third estimate is published two months later.