BRITAIN'S economy rebounded in the first quarter by enough to erase the contraction of the previous three months on the strongest surge in service-industry growth for four years.

Gross domestic product rose 0.5 percent from the final quarter of 2010, when it fell by the same amount, the Office for National Statistics said yesterday in London. The result matched the median forecast of 28 economists in a Bloomberg News survey. Services grew 0.9 percent, the most since 2006.

The economy's production level has returned to where it was before the fourth quarter, when the coldest December in a century disrupted business across the country. The Bank of England is split on whether growth is strong enough to withstand the biggest fiscal squeeze since World War II, allowing them to remove stimulus to fight inflation.

"There's not very strong growth momentum here," Jens Larsen, chief European economist at RBC Capital Markets in London, said in an interview on Bloomberg Television. The bank "is going to wait until at least November before it starts hiking rates."

Chancellor of the Exchequer George Osborne told BBC Television yesterday that the economy is growing. "Of course, around the world we are facing some choppy economic conditions. I think that reinforces our determination to stick to the course," Osborne said.

The UK is the first member of the Group of Seven nations to report official growth data for the first quarter. Services, which make up 76 percent of the economy, grew after a 1-percent gain in business services and finance, the office said.

Barclays Plc, the UK's third-largest bank by assets, made a good start this year "in a challenging external environment," CEO Robert Diamond said yesterday.