- Title: UK economy escapes short-term Brexit hit
- Date: 27th October 2016
- Summary: LONDON, ENGLAND, UK (OCTOBER 27, 2016) (REUTERS) (SOUNDBITE) (English) BRITISH FINANCE MINISTER, PHILIP HAMMOND, SAYING: "We're very pleased to have strong GDP growth numbers. We're pleased with the IMF projection that the UK will be the fastest growing G7 economy this year but we have to look to the future as well and we know from all the survey evidence that business is uncertain about what the next couple of years will bring and we need to be prepared to support the economy during this period. So what I'll be doing in the Autumn Statement, is not just responding to the backward looking data on the economy, which shows that it is resilient but also preparing the economy for a period which will be a bit more uncertain over the next couple of years."
- Embargoed: 11th November 2016 15:41
- Keywords: Britian Hammond GDP economy Brexit vote
- Location: SOUTHAMPTON + LONDON, ENGLAND, UK
- City: SOUTHAMPTON + LONDON, ENGLAND, UK
- Country: United Kingdom
- Topics: Company News Markets,Economic Events
- Reuters ID: LVA00455S5PJH
- Aspect Ratio: 16:9
- Story Text: Britain's economy slowed only slightly in the three months after the Brexit vote.
The stronger-than-expected growth figures published on Thursday (October 27) further diminished the likelihood of the Bank of England cutting rates as soon as next week, prompting investors to sell British government bonds.
But finance minister Philip Hammond said he was pleased the economy is still resilient.
"Very strong third quarter growth. That tells us that we go into period of negotiation for our exit from the EU from a position of strength with the economy doing very well," he said.
Official data showed the economy grew by 0.5 percent between July and September, less rapid than the strong growth of 0.7 percent seen in the second quarter but comfortably above a median forecast of 0.3 percent in a Reuters poll of economists.
Sterling jumped to a one-week high against the U.S. dollar after the data and the yield on 10-year government bonds hit its highest level since the European Union membership referendum.
Britain's dominant services industries provided all the growth, helped by a boom in the film and television sector as the latest releases in the Jason Bourne and Star Trek series hit the screens in July along with other blockbusters.
Compared with the third quarter of last year, growth picked up to 2.3 percent, the strongest pace in more than a year, according to the preliminary figures from the ONS.
Brexit supporters said the figures backed their argument that warnings of a big hit to the economy from a Leave vote were little more than scaremongering.
Economists for Brexit, a group who disagree with the majority view in their profession that leaving the EU is damaging, said Britain's finance ministry "must now come clean" and admit that its long-term forecasting was likely to be wrong, just as its short-term forecasts were.
But many economists are still warning that the real challenge is yet to come.
"The signs that we're going to see in the economy as a result of the Brexit crash are going to come in the form of things like lower business investment. We may see things like property funds taking a hit which we've seen already. But really the broader economy isn't going to be impacted quite yet. We've still seen stronger consumer spending figures, unemployment hasn't risen yet but you wouldn't expect that to until company profits start to get squeezed and in fact we've actually seen a benefits to an extent from the Brexit in the early stages because of the significant drop in the pound has actually helped with things like exports, it's helped with tourism and spending from tourists in the UK. I think it's just too early to see the signs of the domestic economy as a result of Brexit, but I do think it inevitably going to happen," said Craig Erlam, Senior Markets Analyst at Oanda.
The sharp fall in the value of the pound since June is expected to push inflation to around 3 percent next year. BoE Governor Mark Carney this week noted the "fairly substantial" fall in sterling, in a sign that the Bank was no longer expecting to cut rates on Nov. 3.
Many companies are expected to put investment plans on hold pending the outcome of the two-year process of negotiating Britain's exit from the EU and a possibly longer period for securing the terms of its new relationship with the bloc.
Industrial production, including manufacturing, and construction both contracted, down 0.4 percent and 1.4 percent respectively. The fall in construction was the biggest since the third quarter of 2012.
- Copyright Holder: REUTERS
- Copyright Notice: (c) Copyright Thomson Reuters 2016. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: None