UK economic growth hits two-year high but slowdown expected
The UK economy expanded at the fastest pace in two years during the third quarter, but has begun showing signs of a slowdown ahead of Brexit.
In what is likely to be a peak for the economy this year, the latest snapshot from the Office for National Statistics (ONS) showed GDP growth in the three months to the end of September was 0.6%, the fastest expansion since the final quarter of 2016.
But growth has begun to falter as the boost to the economy from warm weather over the summer and England’s performance at the World Cup wanes. GDP growth flatlined in August and September, with signs of weakness in retail sales and a fall in domestic car purchases.
City economists had forecast growth of 0.1% in September, although the UK economy unexpectedly stagnated for the second month in a row. On an annual basis, the British economy grew by 1.5%.
Against a backdrop of significant uncertainty as Theresa May struggles to agree a Brexit deal with the EU, business investment dropped at the fastest rate since early 2016.
The largest contribution to growth in the third quarter came from the UK’s services sector. Net trade – the difference between imports and exports – contributed 0.8 percentage points to GDP growth, with a 2.7% increase in exports versus stagnant growth in imports.
With an expansion of 0.6% in the third quarter, the latest GDP figures suggest the UK economy grew three times faster than that of the eurozone, after growth in the single currency bloc dropped to 0.2%, the lowest rate in four years.
Economists believe UK growth has probably peaked. The Office for Budget Responsibility, the government’s economics watchdog, estimates growth will drop to 1.3% in 2018 from 1.7% last year – which would make 2018 the worst year for the economy since the recession in 2009.
Rob Kent-Smith, the head of national accounts at the ONS, said: “The economy saw a strong summer, although longer term economic growth remained subdued.”
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