British economy defies Brexit gloom with expanding growth

LONDON, Nov. 10 (Xinhua) — The British economy defied the headwinds of Brexit uncertainty to record improved GDP growth over the third quarter of this year, according to figures released on Friday.

The British economy grew at 0.6 percent over the third quarter (August-October), a 50-percent jump in the rate of growth over the second quarter, which recorded 0.4 percent growth, according to data from the Office of National Statistics (ONS), the official data body.

This is the fastest rate of growth since the Brexit referendum vote in June 2016 set Britain on a path to exit the 29-member European Union (EU), and is above the post-referendum trend British rate of about 0.4 percent a quarter.

The 0.6 percent growth also outstrips growth in the EU as a whole which has hit an abrupt slowdown, growing at just 0.3 percent in the EU28 area and 0.2 percent across the euro currency nations.

Weather-related economic weakness at the start of the year, with prolonged snow and low temperatures freezing economic growth at close to zero over the first quarter, has now had a beneficial effect on growth.

The acceleration seen in these third quarter figures is a regaining of growth lost in the first quarter.

The annual pace of GDP growth now steps up to 1.5 percent up from 1.2 percent at the end of the second quarter, maintaining the pace of growth set at the end of 2017.

Household consumption growth rose from 0.3 percent in the second quarter to 0.5 percent in the third, and accounted for half GDP growth.

Fixed investment recovered, rising by 0.8 percent over the quarter, having fallen in the previous two.

The uncertainties over the Brexit process, with divorce talks currently stalled between Britain and the EU and a deadline for exit of the end of March next year were clearly seen in the business investment figures.

Business investment fell 1.2 percent over the quarter, its worst reading since before the 2016 Brexit referendum and the third quarter of decline as businesses hesitated with investment decisions over fears that new trade and tariff charges would affect businesses adversely.

“The improved third quarter growth performance was in line with most expectations, and was clearly boosted by the heatwave buoying consumer spending along with the football World Cup,” Howard Archer, chief economist at economic forecaster EY ITEM Club told Xinhua.

“There was also likely an ongoing catch-up of activity lost to the extreme cold weather. Certainly, this helped construction activity. “

Archer added that despite the improved third quarter performance, monthly data for September showed that the economy was flat at the end of the quarter, indicating that the economic boost from regaining lost ground from the first quarter may now be at an end.

IN LINE WITH EXPECTATIONS

Britain’s rate of growth is now affirmed as on track for the latest projections from the central bank the Bank of England (BoE).

The BoE advised in its latest inflationary report at the beginning of the month that the continued solid GDP growth alongside above-target Consumer Price Index (CPI) inflation figures — 2.7 percent in October against a 2 percent central bank target — would indicate three bank rate rises each of 25 basis points over the coming two years.

This would take the bank rate to 1.5 percent from its current 0.75 percent rate.

However, the BoE’s forecasts came with a Brexit warning, with bank governor forecasting that rates could go up or down depending on the disruption caused by any Brexit deal or if no deal was reached and Britain crashed out of the EU.

A Brexit deal that sees new barriers and tariffs is likely to have a serious and instant impact on the economy.

Archer said: “If the UK does end up exiting the EU without a deal next March, growth in 2019 is likely to come in substantially lower as major uncertainty hits consumer and business sentiment and investment.

“Trade will also be affected, although, with both export and import growth suffering, the effect on GDP growth from this source would be ambiguous.”

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