The UK economy grew by a better-than-expected 0.5 per cent in the three months to September, although this was down from 0.7 per cent in the second quarter, official figures revealed today.
Today’s figures bucked expectations of a substantial slowdown in the three months after the Brexit vote thanks to a “strong performance” from the powerhouse services sector. Economists had been pencilling in a steeper fall of 0.3 per cent in gross domestic product (GDP) for the third quarter.
The Office for National Statistics (ONS) said that the services sector, which accounts for about three-quarters of economic output, expanded by 0.8 per cent in the three-month period following the UK’s vote to leave the European Union.
It said there was little evidence of a “pronounced” impact on the economy in the immediate fallout of the EU referendum result.
The main boost to services came from transport, storage and communication, which grew at its fastest pace since the fourth quarter of 2009, rising 2.2 per cent over the period in contrast to 0.6 per cent in the second quarter.
In contrast, construction activity decreased by 1.4 per cent, agriculture by 0.7 per cent and production by 0.4 per cent. Within the production sector, there was a 1 per cent drop in manufacturing output.
Joe Grice, ONS chief economist, said the data provided the “most comprehensive picture so far of the post-referendum UK economy”, reflecting information from more than 37,000 UK firms.
“While quarterly growth has fallen slightly, the economy has continued to expand at a rate broadly similar to that seen since 2015 and there is little evidence of a pronounced effect in the immediate aftermath of the vote,” he added.
“A strong performance in the dominant services industries continued to offset further falls in construction, while manufacturing continued to be broadly flat.”
Nick Dixon, investment director at Edinburgh-based financial services group Aegon, said: “The UK economy appears to have weathered the Brexit vote better than feared, with lower business confidence offset by the softer pound which has raised aggregate demand.
“The key tension to play out over the next 12 to 18 months is whether higher exports can trump uncertain business confidence and muted investment. In addition with inflation already on the turn, we believe interest rates will start to rise in the first half of 2017 and accelerate more quickly than market expectations.”
Inflation hit 1 per cent in September – its highest level for almost two years – and is expected to rise further as the plunging pounds ramps up costs. Sterling has fallen about 20 per cent against the US dollar since the Brexit vote on 23 June.
Chancellor Philip Hammond said: “The fundamentals of the UK economy are strong, and today’s data show that the economy is resilient. We are moving into a period of negotiations with the EU and we are determined to get the very best deal for households and businesses.
“The economy will need to adjust to a new relationship with the EU, but we are well placed to deal with the challenges and take advantage of the opportunities ahead.”