Economy performs better than expected in the fourth quarter
BRITAIN’S ECONOMY performed better than expected in the fourth quarter thanks to the country’s powerhouse services sector, though there are warning signs of “slower and uneven” growth.
The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.5 per cent in its initial estimate for October to December last year, following growth of 0.4 per cent in the third quarter.
Economists had been expecting growth of 0.4 per cent, according to consensus figures, though a minority had forecast a slowdown to 0.3 per cent on the back of a temporary shutdown of a major North Sea oil pipeline last month. The biggest impact came from the UK’s services sector – which accounts for about 79 per cent of the economy.
Services grew 0.6 per cent quarter on quarter, with business and financial services making the biggest contribution, accounting for work from the likes of lawyers, architects and business administrators. However, the ONS said longer-term trends were pointing to a broader slowdown.
ONS head of GDP Darren Morgan said: “Despite a slight uptick in the latest quarter, the underlying picture is of slower and uneven growth across the economy.
“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,” he said, referring to industries such as distribution, hotels, catering, transport and communications. Manufacturing also grew strongly but construction again fell.”
The UK economy is still struggling to bounce back to levels seen in the final quarter of 2016 when GDP rose by 0.6 per cent.
The estimate came shortly after Bank of England Governor Mark Carney admitted that the vote to leave the EU had cost the UK “tens of billions of pounds” in lost economic activity, blaming the “Brexit effect” for holding back investment in the UK.
Sterling rose sharply against the dollar following the news, flirting with $1.43, up one per cent on the day. Against the euro, the pound was up 0.4 per cent to 1.14 euros.
Manufacturing growth contributed to a 0.6 per cent rise for production industries over the quarter, but that was partly offset by a “significant” fall in oil and gas extraction.
Manufacturing grew strongly but construction again fell. Darren Morgan, Office for National Statistics head of GDP.