British economy defies fears of immediate Brexit impact
Britain’s economic growth slowed only slightly in the three months after the Brexit vote, official data showed on Thursday defying warnings of a heavy hit and further diminishing the likelihood of the Bank of England cutting rates next week.
The economy grew by 0.5% in the July-september period, less rapid than the unusually strong growth of 0.7% seen in the second quarter, but comfortably above a median forecast of 0.3% in a Reuters poll of economists.
“There is little evidence of a pronounced effect in the immediate aftermath of the vote,” Office for National Statistics chief economist Joe Grice said, adding growth was in line with the pattern since 2015.
Britain’s dominant services industries provided all the growth, helped by a boom in the film and television sector as the latest releases in the Jason Bourne and Star Trek series hit the screens along with other blockbusters.
Sterling jumped to a one-week high against the US dollar after the data and the yield on 10-year government bonds hit its highest level since the European Union membership referendum as investors discounted the chance of a BOE rate cut on Nov. 3.
Compared with the third quarter of last year, growth picked up to 2.3%, the strongest pace in more than a year, according to the preliminary figures from the ONS.
Brexit supporters said the figures backed their argument during the referendum campaign that warnings of a big hit to the economy from a Leave vote were little more than scaremongering.
But economists warned the real challenge was yet to come.
“The adverse consequences of the Brexit vote will become increasingly clear as inflation shoots up and firms postpone investment over the coming quarters,” Samuel Tombs, an economist at Pantheon Macroeconomics, who correctly predicted the quarterly growth rate in the Reuters poll, said.
BANK OF ENGLAND NEARS DECISION TIME
The BOE said in September that the preliminary ONS reading would probably show third quarter growth of only 0.2%.
The Bank has come under criticism from some Brexit supporters for warning of a big economic hit from a vote to leave the EU. It has predicted a sharp slowing of growth next year as the impact of the referendum is felt more fully.
NISSAN TO BUILD MODEL IN UK DESPITE BREXIT
Japanese carmaker Nissan said it will build its new Qashqai model at Britain’s biggest car plant, confirming a report from Reuters, marking the first major investment from the autos industry since the UK voted to leave the EU.
Chief Executive Carlos Ghosn warned in September that Brexit could threaten new investment in Nissan’s Sunderland plant, but said on Thursday that UK government support had helped it to go ahead with its new investment.