UK GDP growth highest in almost two years

The UK economy grew at its fastest rate since the end of 2016 in the third quarter of the year, the Office for National Statistics (ONS) revealed on Friday.

UK GDP growth highest in almost two years
According to new figures from the ONS, in the third quarter the UK economy grew at its fastest rate since the end of 2016.Gross domestic product rose by 0.6 per cent in Q3, which was in line with economists' expectations. The main boost to the economy came in July when warm weather led to an increase in consumer spending and construction activity picked up. Overall growth tapered off in both August and September.

Longer term economic growth remains subdued

Household spending grew by 0.5 per cent over the quarter while business investment, which has shrunk throughout the year because of Brexit uncertainty, declined by 1.2 per cent.Rob Kent-Smith, head of national accounts, said, "The economy saw a strong summer, although longer term economic growth remained subdued. There are some signs of weakness in September with slowing retail sales and a fall back in domestic car purchases."However, car manufacture for export grew across the quarter, boosting factory output. Meanwhile, imports of cars dropped substantially, helping to improve Britain's trade balance."

Growth in the UK better than the Eurozone

The UK's third quarter growth pales in comparison with the 0.9 per cent reported in the US but stands up well against the 0.2 per cent reported for the eurozone, outstripping France's 0.4 per cent and Italy's zero. Germany's Q3 data will not be published until next week. Chancellor of the Exchequer Philip Hammond said, "Today's positive growth is proof of the underlying strength in our economy. We are building an economy that works for everyone, with 3.3 million more people in work, lower unemployment in every part of the country, and wages rising at their fastest pace in almost a decade."But Alpesh Paleja, principal economist at the Confederation of British Industry, said the while "the sun shone on the UK economy over the summer", the prospect was for subdued growth in the future."Indeed, our surveys for October already paint a picture of weaker momentum," he said. “While the measures announced in the Budget delivered for business in many respects, there are still significant challenges. Weak real pay growth means consumers are still tightening their purse strings and Brexit uncertainty has become a drain on investment.”

Is business activity set to lose steam?

Tej Parikh, senior economist at the Institute of Directors, added, “Despite sturdier growth in the third quarter, there remains no room for complacency.“Quarterly growth has reached a near-two year high, but looking beneath the surface, the uptick is skewed by the summer’s buoyant, world-cup fuelled retail activity. With order books weakening and major hiring and investment decisions being held back, business activity looks set to lose steam in the coming quarters.“Moreover, while consumers have shown a degree of resilience in the face of uncertainty, households are now likely to demonstrate extra caution on the Christmas spend this year with the cost of living still squeezed and confusion around Brexit beginning to bite a bit more.“The chancellor’s measures in the Autumn Budget may help lift growth when they come into effect next year, but until then confidence will continue to struggle as long as Brexit negotiations stutter.”

Brexit uncertainty likely to limit economic activity

Suren Thiru, head of economics at the British Chambers of Commerce, commented, “While the pick-up in GDP growth in the third quarter is welcome, the stronger headline figure masks a loss of momentum through the quarter from the particularly strong July out-turn, when a number of temporary factors, including the heatwave and the World Cup, boosted activity. “The services and construction sectors were the strongest performers in the quarter, reflecting a boost in activity from the exceptionally hot summer. The fall in business investment is a concern as it stifles productivity and growth."However, measures such as the increase in the Annual Investment Allowance announced in the Budget should provide a lift to investment over the near term.“It remains likely that the stronger growth recorded in the third quarter is a one-off for the UK economy, with persistent Brexit uncertainty and the financial squeeze on consumers and businesses likely to weigh increasingly on economic activity in the coming quarters."To ease the extent of current uncertainty, the government must deliver a comprehensive Brexit deal that gives firms the clarity and precision they need.”Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Global Mobility Toolkit download factsheets resource centreAccess hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online DirectorySubscribe to Relocate Extra, our monthly newsletter, to get all of the international assignments and global mobility news.