Britain has finally emerged from its worst post-war downturn after growth of 0.8% in the second quarter of 2014 took the size of the economy above its pre-recession peak.

The performance left the UK's gross domestic product (GDP) 0.2% ahead of its level at the start of 2008, the Office for National Statistics (ONS) said.

It marks the end of a period when GDP slumped to 7.2% below its pre-recession levels by the middle of 2009.

The stuttering recovery did not take flight until last year when growth began to accelerate.

But Britain is now predicted to be the fastest growing major world economy in 2014. Yesterday the International Monetary Fund (IMF) raised its GDP forecast for the fourth time in a row to 3.2%.

Speaking about the figures, Chancellor George Osborne said: 'Thanks to the hard work of the British people, today we reach a major milestone in our long-term economic plan.'

Today's figures showed that GDP was 3.1% higher in the second quarter compared with the same period a year ago - the highest such year-on-year increase since the last quarter of 2007.

The 0.8% growth for the second quarter, which was widely forecast, was primarily driven by the powerhouse services sector, which accounts for three-quarters of output, and grew by 1%.

But expansion in the manufacturing sector slowed to just 0.2% while construction shrank by 0.5%, dragged down by a weak May for builders.

For both sectors it was the worst quarter since the start of 2013.

The figures mean that while the services sector is now 2.9% ahead of its level at the start of 2008, manufacturing is still 7.4% behind and construction lagging by 10.7%.

The continuing pace of the recovery - with growth maintaining the pace of the first three months of the year - will feed into expectations about the timing of an interest rate rise.

Accelerating signs of economic improvement have seen these brought forward.

However, critics of the Coalition point to evidence that it is not yet filtering through to ordinary households as real terms pay is falling.

Latest figures show while employment levels are improving strongly, pay growth has fallen to just 0.3%, lagging well behind inflation at 1.9%.

Opponents of the Government also point to the measure of GDP per head, which in the first quarter of this year was 5.5% below the peak. The measure for the second quarter is not yet available.

Prime Minister David Cameron described the figures as a major milestone but stressed that the Government's work was not finished yet.

On a visit to brand management company Pentland in north London, he said: 'I think, thanks to the very hard work of the British people, we have reached a major milestone in our long-term economic plan.

'But absolutely the work isn't finished yet, the country suffered hugely from the Great Recession and there's more we need to do.'

Shadow chancellor Ed Balls said: 'At long last our economy is back to the size it was before the global banking crisis - three years after the US reached the same point.

'But with GDP per head not set to recover for three more years and most people still seeing their living standards squeezed, this is no time for complacent claims that the economy is fixed.

Prime Minister David Cameron tweeted: 'It's encouraging news that the economy is larger than pre-crash levels. Our long term economic plan is working and this is a major milestone.'

Deputy Prime Minister Nick Clegg said: 'Today is a big day for Britain - the rescue has worked: our economy is now larger than it was before the crash.

'For the Liberal Democrats, this shows we were right to step up to the plate and form a coalition Government in the first place.

'Our first duty was to pull the economy back from the brink. The rescue has succeeded because of us.'

CBI director-general John Cridland said: 'With confidence rising and businesses investing, we're starting to see a recovery built on solid foundations. We now have a strong launchpad to propel the economy forward.

'Our surveys have indicated that growth has been broad-based across sectors. The latest GDP figures show that the service sector performed strongly and manufacturing output continued to rise.

'While it has been a disappointing quarter for the construction sector, we expect this to pick up, with demand for new housing still high.

'While there are still risks to growth at home and abroad, we are hopeful the economy will keep motoring along at a steady pace for the rest of this year and next. Now it's important that we ensure everyone shares the benefits of growth, and this is a priority for business.'

TUC general secretary Frances O'Grady said: 'The economy may finally be back to where it was in early 2008 but pre-crash living standards are a long way off. Workers are still, on average, around £40 a week worse off.

'Despite stronger growth, the Government's plan for further sharp spending cuts means that the scaling back of vital public services, from library closures to the squeeze on NHS spending, is now looking permanent.

'The Government is overseeing economic growth driven by low pay and low productivity. This is the wrong kind of recovery and won't deliver the higher living standards and sustainable growth that Britain needs.'

• Tell us whether your business has bounced back from the dark days of the recession? Contact business writer Ben Woods on 01603 772426 or email ben.woods@archant.co.uk