The British economy expanded by 0.5% in the three months ending in September, according to the GDP advanced reading, beating estimates of 0.3% and compared with the 0.1% expansion recorded in the second quarter.

The reading was boosted by the advance in services output by 0.7%, led by the 0.8% rise in finance and business services, and industrial production by 0.5%, drive up by the increase in manufacturing by 0.2%.

Over annual basis, the pace of growth eased to 0.5% from the previous 0.6%.

While the reading showed improvement in the third quarter, still there are concerns that the British economy may face sluggishness in the coming period.

BoE policymaker, Martin Weale said there is a possibility that the economy could witness contraction in the fourth quarter, while Paul Fisher said there is a high probability the U.K. could experience another recession and the BoE may add further to stimulus after the current round is completed.

Mervyn King, on the other hand, clarified that the bank was very close to restarting APF program in September yet they preferred to delay the decision to October to see if the volatility in financial markets would calm down.

The International Monetary Fund (IMF) cut growth forecasts for U.K. to 1.1% from 1.5% for the current year and to 1.6% from 2.3% for 2012.

Separately, PMI manufacturing showed a contraction of 47.4 in October from the expansion of 51.1 in September.

After the release of growth and PMI manufacturing data, the sterling fell more against the dollar to trade around 1.5940 compared with the day's starting level of 1.6084.

The sharp spending cuts by the government to rein in the huge budget deficit had led to cut in growth and rise in unemployment.

U.K. unemployment climbed to the highest level in 15 years as the rate rose to 8.1% in the three months ended August, pushing the number of people without jobs surged to 2.57 million, while the number of employed people dropped 178,000.

Eyes will be on the BoE rate decision on Thursday despite expectations that there will be no change in monetary policy in November.

BoE minutes for October 6 monetary decision showed a unanimous vote for all the nine MPC members to hold borrowing cost at 0.50% while boosting the Asset Purchase Facility (APF) by 75 billion pounds to reach 275 billion pounds.

The BoE is currently facing a "mission impossible" as policy makers have to shore up the economy and avoid an expected recession while lowering inflation which accelerated to 5.2% in September, for the first time since September 2008, from 4.5% in August.

The BoE predicts inflation rate to reach 5% in 2011, yet easing in 2012 and 2013, where it expects it to reach 1.8% in the second quarter of 2013.