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Can this man take credit for UK’s GDP boost?

British Cancellor of the Exchequer George Osborne
Nicholas Kamm | AFP | Getty Images
British Cancellor of the Exchequer George Osborne

George Osborne, Britain's finance minister has faced plenty of flak for Britain's sluggish recovery. But after data released on Thursday showed the U.K. economy grew 0.6 percent in the second quarter, double the rate at the start of the year, Osborne took to twittersphere to defend his plan.

(Read More: Services sector helps double UK's economic growth)

Osborne tweeted:


Are Osborne's policies really securing the economic future of Britain - or is the recent optimism in U.K. growth down to something entirely beyond his control?

Geoff Cooper, the CEO of Travis Perkins, the U.K.'s biggest supplier of building materials, says the upturn in his sector had been helped by government policies. Travis Perkins posted a 4.1 percent rise in first-half profit on Thursday.

Construction output increased by 0.9 percent in the second quarter of 2013, having decreased by 1.8 percent in the previous quarter. For Cooper, it was Osborne's "Help to Buy" scheme, which guarantees up to 15 percent of a mortgage for first-time buyers, which had boosted the construction of new houses.

"We didn't write George Osborne's budget, but we would have written it like that. The boost in the housing market has really helped people on the building side. And we've seen that come through – house builders responded pretty quickly to step volumes up in April. A lot of people have taken advantage of the support schemes that are available," Cooper told CNBC.

Cooper said that construction had been hit hardest by the economic downturn in recent years and predicted that this decoupling would soon come to an end.

"We think construction activity is probably about 20 percent below its level pre-recession, so what you're probably going to see is a reversal of that downward decoupling," he said. "We're going to get stronger growth in construction, we're going to get stronger growth in housing."

(Read More: Britain's GDP seen strong—But unsustainable)

Construction myth?

However, construction's growth is not the main piece of the 0.6 percent growth in GDP, services accounted for 0.48 percentage points of that growth.

"The 'Help To Buy' scheme is certainly helping house-builders and so the construction supply chain. But for me it is a sideshow if we're looking at the aggregate economy," said Robert Wood, chief U.K.economist at Berenberg Bank. "Construction contributed close to nothing to growth in the second quarter. And the 'Help to Buy' scheme came after the surprise 0.3 percent growth in the first quarter.

"It seems to me that it is the Bank of England's loose interest rate policy that is feeding through. Mortgage rates have tumbled since last summer, that is pushing up house prices and getting people out spending again. It's a sugar rush of low interest rates and rising house prices encouraging households to save less."

Wood said it is Bank of England Governor Mark Carney who holds the key to the U.K.'s growth picture and keeping interest rates down: "The stakes are high for Mark Carney in his battle to talk down the curve. We are optimistic about his powers of persuasion. If he fails and higher rate expectations feed through to mortgages,consumption will falter."

Philip Lachowycz, an economist at Fathom Consulting, said Osborne's budget was not what the U.K. economy needed and that he worried about over-stretched consumers taking on more debt.

"We are optimistic about growth in the short-term, but are concerned about the sustainability of more debt-fuelled growth in the longer-term against the background of very weak underlying potential growth."

"The Chancellor has missed an opportunity to fix the U.K.'s structural problems – namely its banks. In our view, the March Budget was almost the exact opposite of the correct prescription to boost the U.K.'s long-term growth prospects."

While Wood and Lachowycz may not agree with Cooper on Osborne's policies, there is an overwhelming consensus that U.K. economic growth will remain sluggish.

"We predicted when we came into the year that the first quarter was going to be really, really tough, the second quarter was going to show a bounce back, and then the market was going to settle down to some reasonably steady growth," Cooper said.

"Remarkably it looks like our predictions have come true."

—By CNBC's Kiran Moodley: Followhim on Twitter @kirancmoodley

Contact Europe: Economy

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