UK firms show no Brexit vote hit

Busi­ness in­vest­ment rises strongly in Q3, beat­ing ex­pec­ta­tions

Kuwait Times - - INTERNATIONAL -

LON­DON:

Bri­tish com­pa­nies brushed off the un­cer­tainty over Brexit in the three months af­ter June’s ref­er­en­dum and in­creased their in­vest­ment, help­ing to drive solid growth in the econ­omy, of­fi­cial data showed yes­ter­day. Busi­ness in­vest­ment ex­panded at a quar­terly rate of 0.9 per­cent in the three months to Septem­ber, the Of­fice for Na­tional Sta­tis­tics said, beat­ing ex­pec­ta­tions for a 0.6 per­cent rise in a Reuters poll of economists.

Bri­tain’s econ­omy over­all grew by 0.5 per­cent in the third quar­ter, the ONS said, helped by a re­bound in ex­ports and ro­bust house­hold spend­ing, the ONS said. A sep­a­rate sur­vey showed re­tail sales grow­ing at the fastest pace in more than a year this month and sug­gested strong con­sumer spend­ing will con­tinue to drive the econ­omy in the fourth quar­ter.

Bri­tain’s econ­omy has per­formed much bet­ter than most economists had ex­pected in the im­me­di­ate af­ter­math of June’s vote to leave the Euro­pean Union. But a much big­ger test awaits next year. Ris­ing in­fla­tion caused by the pound’s post-ref­er­en­dum plunge looks set to squeeze house­hold spend­ing and economists said they still ex­pected busi­ness in­vest­ment to slow. “So far, so good, then,” HSBC econ­o­mist El­iz­a­beth Martins said. “But we find it hard to be­lieve that the econ­omy can sus­tain this pace of ex­pan­sion, given the in­di­ca­tions from busi­ness sur­veys and grow­ing price pres­sures.” Bri­tain’s busi­ness in­vest­ment sta­tis­tics are prone to big re­vi­sions and the ONS said most of the in­vest­ment de­ci­sions cap­tured in yes­ter­day’s data prob­a­bly took place be­fore the Brexit ref­er­en­dum.

While tech gi­ants Face­book and Google and car­maker Nis­san have com­mit­ted to in­vest­ing in Bri­tain since the vote, some busi­ness sur­veys sug­gest the scores of smaller firms have curbed plans for cap­i­tal spend­ing re­cently. In a move aimed at off­set­ting the likely slow­ing of pri­vate in­vest­ment in the next cou­ple of years, fi­nance min­is­ter Philip Ham­mond this week an­nounced he will bor­row 23 bil­lion pounds ($29 bil­lion) to in­vest more in hous­ing, trans­port and dig­i­tal in­fra­struc­ture over the next five years. The strong re­tail sales fig­ures from the Con­fed­er­a­tion of Bri­tish In­dus­try on Fri­day chimed with the of­fi­cial data show­ing house­holds in­creased their spend­ing by 0.7 per­cent in the third quar­ter, slow­ing slightly but still help­ing to drive the econ­omy in the face of un­cer­tainty around Brexit.

But the out­look for house­hold spend­ing looks doubt­ful. The In­sti­tute for Fis­cal Stud­ies think tank warned of “dread­ful” wage growth on Thurs­day with wages set to be lower in in­fla­tion-ad­justed terms in 2021 than they were in 2008. Net trade added 0.7 per­cent­age points to eco­nomic growth in the third quar­ter, the big­gest pos­i­tive con­tri­bu­tion since early 2014 and helped by strong growth in ex­ports af­ter the pound’s post-ref­er­en­dum plunge. “So the weak pound may al­ready be de­liv­er­ing some up­sides,” said Martin Beck, se­nior eco­nomic ad­viser to the EY ITEM Club con­sul­tancy. “But the down­sides of that weak­ness in push­ing up in­fla­tion means that GDP growth in the near-term may strug­gle to match Q3’s per­for­mance.” The econ­omy over­all ex­panded 2.3 per­cent ver­sus the same pe­riod a year ear­lier, un­changed from a pre­lim­i­nary es­ti­mate. —Reuters

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