UK economy picked up at end of 2017

LONDON: Britain’s economy grew 0.5 percent in the final three months of last year, official data showed Friday, picking up speed despite Brexit uncertainty.

However, the buoyant performance, propelled by the powerhouse services sector, was not enough to prevent the weakest annual growth for five years as a result of the so-called “Brexit effect”.

“UK gross domestic product (GDP) was estimated to have increased by 0.5 percent in quarter four 2017, compared with 0.4 percent in quarter three,” the Office for National Statistics (ONS) said.

The reading was in line with market expectations, boosted by the services sector, and was the best performance since the same quarter of 2016. However, the ONS added that British economic growth stood at 1.8 percent last year. That was the weakest annual rate since 2012 and marked a modest slowdown from 1.9 percent in 2016.

‘Brexit effect’

Bank of England governor Mark Carney, speaking from Davos, admitted there was a short-term “Brexit effect” on economic activity. “What’s happening in the UK is the Brexit effect in the short term,” Carney told BBC Radio 4 from the sidelines of the World Economic Forum in Switzerland.

“Businesses in the UK ... are waiting to see what kind of relationships we will have with Europe and what kind of relationships we will have with the rest of the world.” He added however that the economy could grow more strongly this year once those relationships are clear. Howard Archer, chief economic advisor at the EY ITEM Club research group, noted that Brexit turmoil had taken its toll. “GDP growth was 1.8 percent in 2017. This was a significantly better performance than had been widely expected at the start of the year, given the major Brexit uncertainties that were expected to-and duly did-persist through the year” said Archer.

“Additionally, there was a major squeeze on consumer purchasing power. “Nevertheless, GDP growth of 1.8 percent in 2017 was the slowest UK expansion since 2012 and it looks somewhat uninspired compared with markedly improved global growth.”

Hargreaves Lansdown economist Ben Brettell added that activity was “uneven”. “The overall picture is one of muddling through,” Brettell said. “Growth still looks lackluster and somewhat unevenly distributed ... but it’s certainly fair to say the economy has performed much better than many feared in the aftermath of the Brexit vote, boosted by the rising tide of a global recovery which has lifted all boats.”

Many experts had predicted economic chaos in the event of a Brexit vote in the nation’s 2016 referendum, but this has so far failed to materialize. Britons narrowly voted to leave the European Union, with departure scheduled for March 2019. Slow and uneven

The ONS added Friday that expansion was primarily driven by the services sector, which accounts for almost 80 percent of economic activity. But it also cautioned over patchy growth.

“Despite a slight uptick in the latest quarter, the underlying picture is of slower and uneven growth across the economy,” said ONS head of GDP Darren Morgan.

“The boost to the economy at the end of the year came from a range of services including recruitment agencies, letting agents and office management. “Other services-notably consumer facing sectors-showed much slower growth. “Manufacturing also grew strongly but construction again fell,” Morgan added.