Households drive UK growth

Overall economic growth speeded up moderately in the July-September period

Britain’s economy again relied heavily on spending by squeezed households for growth in the three months to September, as businesses invested only cautiously while they await clarity on Brexit, official data showed.

The fragile picture of the economy echoed the sharply weaker outlook announced on Wednesday by Britain’s budget watchdog, which prompted finance minister Philip Hammond to say he would spend more over the next two years.

The Office for National Statistics said overall economic growth speeded up moderately in the July-September period to 0.4 per cent from 0.3 per cent in the second quarter, confirming a preliminary reading. But Britain is lagging other big advanced economies, largely due to the impact of last year’s decision to leave the European Union, which has pushed up inflation and left many companies unwilling to commit to new investment while London and Brussels remain at loggerheads over their future ties.

The economy grew by an annual 1.5 per cent in the third quarter, the joint weakest growth in more than five years.

Growth was driven by spending by households which rose at its fastest pace in a year, helped by a recovery in car sales which had been weak in the second quarter after a tax increase.

Separate data published yesterday showed British shop sales rebounded in November after a sharp fall last month, although the number of retailers reporting rising prices hit their highest level since 1991.

Allan Monks, an economist at JP Morgan, said he thought the pickup in spending by consumers over the summer would prove temporary, given the stillweak income picture for households and a rise in oil prices that will hit their budgets.

Howard Archer, an economist at forecasters EY Item Club, said the squeeze on consumers should ease in 2018 when inflation is expected to fall back, but that uncertainties about Brexit were likely to weigh further on business investment.

Businesses upped their investment by 0.2 per cent in the three months to September, the weakest pace so far this year.