A leading think-tank has raised its estimate of growth in the UK economy to 0.6 per cent in the final quarter of 2017.

UK manufacturing sector surge

The upgrade by the National Institute of Economic and Social Research (Niesr) came as official data showed that output by Britain’s manufacturing sector surged at an annual rate of 3.9 per cent in the three months to November.Figures from the Office for National Statistics (ONS) showed manufacturing notched up its seventh consecutive month of expansion in November – the first time this has happened since 1994 – thanks mainly to economic expansion in China, the US and Europe, and the fall in the value of sterling since the Brexit referendum.Niesr’s latest estimate of GDP growth in Q4 last year was above forecasts from other City analysts and was an increase from the 0.4 per cent recorded in the third quarter.

Manufacturing benefits from weaker pound and a buoyant global economy

Amit Kara, Niesr’s head of UK macroeconomic forecasting, said economic activity had increased noticeably in the second half of 2017 after a comparatively weak start to the year.“The recovery has been driven by both the manufacturing and the service sectors, supported by the weaker pound and a buoyant global economy, while construction output continues to lag,” he said.“In November, we had forecast final quarter GDP growth at 0.5 per cent and as such, today’s revised estimate suggests that activity has strengthened by more than we had previously anticipated.”

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Talk of interest rate changes reignited

According to Niesr, the better-than-expected economic performance coupled with inflation running above the government’s two per cent target could lead to the Bank of England raising interest rates to 0.75 per cent as early as May, with further increases likely every six months until mid-2021.Chris Williamson, chief business economist at IHS Markit, said recent purchasing managing index surveys suggested that manufacturing “fared well again in December and that the construction sector continued to show signs of stabilising somewhat after the downturn seen earlier in the year”.He added, “The data so far suggest that fourth quarter economic growth could match, or even beat, the 0.4 per cent expansion of GDP seen in the third quarter.”Ole Black, a senior ONS statistician, said the latest manufacturing data showed “strong and widespread growth across manufacturing, with notable increases from renewable energy projects, boats, planes and cars for export”.

UK exports on the increase

The ONS said that the stronger global economy was helping Britain export more goods and services and, although the UK continued to import more than it exported, the deficit narrowed by £2.1 billion in the three months to November.Mr Black said, “The trade deficit narrowed in the past three months, due mainly to increased exports of services, and shipments of works of art and cars. Over the past year, exports of goods, particularly cars, machinery and crude oil, have continued to increase, and at a faster rate than imports.”

Exports through Heathrow on the rise

Heathrow Airport recorded its busiest ever year in 2017, a report on Thursday showed. Some 78 million passengers used the airport last year, a 3.1 per cent increase on 2016. The Middle East market saw the largest annual growth with a 9.5 per cent increase, followed by Latin America (5.5 per cent) and Asia (4.5 per cent).Cargo passing through Heathrow also rose substantially: up more than ten per cent to about 1.7 million tonnes.The government plans to publish final proposals for a third runway at Heathrow in the first half of this year with the aim of starting construction in 2021 and completing it by the end of 2025.

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Read more about the future of the UK business in the Winter issue of our magazine 

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