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UK economy picks up but slowdown looms before Brexit
LONDON, Nov 10, 2018 (BSS/AFP) – 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 awaiting a
Brexit deal.
Gross domestic product climbed 0.6 percent in the third quarter, in line
with analysts’ expectations and up on growth of 0.4 percent in the second
quarter, the Office for National Statistics (ONS) said in an initial
estimate.
At 0.6 percent growth for July-September, GDP was the strongest reading
since the fourth quarter of 2016.
Analysts meanwhile expect the economy to cool ahead of Britain’s departure
from the European Union in March.
“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 also revealed Friday that growth had already turned flat in August
and September, after July registered solid expansion.
“Taken together, we think UK growth has clearly lost some momentum,”
concluded HSBC economist Chris Hare.
“The summer spending spree is over, global tailwinds have waned and Brexit
uncertainty continues to bite.”
Nevertheless, the ONS said third-quarter growth was driven by an expansion
of 0.3 percent 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 percent in the third quarter, while exports
jumped 2.7 percent and household spending increased 0.5 percent.
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“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 percent in
2019, down from a forecast of 1.8 percent.
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”, said Howard
Archer, chief economic advisor to the EY ITEM Club.
Friday’s 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.
BSS/AFP/HR/0930