Britain’s economy has grown at the fastest pace in nearly two years as strong exports and solid household spending offset slumping business investment, data showed Friday (9) awaiting a Brexit deal.
Gross domestic product climbed by 0.6 per cent in the third quarter, in line with analysts’ expectations and up on growth of 0.4 per cent in the second quarter, the Office for National Statistics (ONS) said in an initial estimate.
At 0.6 per cent growth for July-September, GDP was the strongest reading since the fourth quarter of 2016.
Analyst meanwhile expect the economy to cool ahead of Britain’s departure from the European Union in March, starting with the current fourth quarter.
“It seems unlikely that the economy will be able to keep up this pace with Brexit uncertainty hanging over it,” noted Thomas Pugh, UK economist at Capital Economics research group.
The ONS said the third quarter growth was driven by an expansion of 0.3 per cent in July, “which stemmed from strong retail sales boosted by warm weather and the World Cup, as well as a low base reflecting the weaker start to the year”.
It added, “the recent subdued business investment environment is consistent with external surveys of investment intentions, which attribute much of the weakness to Brexit-related economic and political uncertainty.”
Business investment slid 1.2 per cent in the third quarter, while exports jumped 2.7 per cent and household spending increased 0.5 per cent.
“The export growth… reflects an increase in both goods and services exports, with goods exports to non-EU countries growing more robustly than to the EU,” the ONS noted.
Brakes On Growth
Britain could be about to finally seal an all-important deal to smooth its departure from the European Union, although reports this week of an imminent announcement have cooled somewhat heading into the weekend.
And despite stronger growth for the UK economy in the third quarter overall, the Bank of England last week trimmed its own GDP forecasts as Brexit approaches.
The BoE predicted that Britain’s economy would grow by 1.7 per cent in 2019, down from a forecast of 1.8 per cent.
The new estimate is based on the assumption of a smooth transition period, but there is unease on markets about a chaotic no-deal Brexit.
And before then, “growth in the fourth quarter is expected to be limited by more restrained consumer spending…, while business investment is expected to be curbed by heightened Brexit uncertainties”, Howard Archer, chief economic advisor to the EY ITEM Club, said Friday following the latest data.
The GDP update came as British Prime Minister Theresa May drew the fury of her crucial Northern Irish allies after seemingly accepting an EU-backed Brexit solution they fervently oppose.
At issue is the vexing problem of how to avoid border checks between Northern Ireland, a UK province, and the eurozone-member Republic of Ireland.