The economy grew by 0.5% in the three months following the Brexit vote
November 1, 2016: Britain’s economy grew more than expected in the three months following its vote to leave the European Union despite concern that apprehension over the country’s future would weigh on business.
The economy expanded by 0.5% in the period from July to September, according to the Office for National Statistics. This growth came in largely due to the services sector. Although this was slower than the rate of 0.7% of the preceding quarter, it still remained far stronger than the analysts’ estimates of around 0.3%. This is the first estimate of economic growth for the period, using less than half the data that will be used for the final estimate.
“The economy has continued to expand at a rate broadly similar to that seen since 2015 and there is little evidence of a pronounced effect in the immediate aftermath of the vote,” said Joe Grice, the chief economist at ONS. “A strong performance in the dominant services industries continued to offset further falls in construction, while manufacturing continued to be broadly flat.”
“In manufacturing, the contraction in output should be attributed to some unwinding of the massive growth spike seen in the second quarter, rather than industry scaling back production for any referendum related reasons,” said Lee Hopley, chief economist at the EEF, the manufacturers’ organisation. “In line with the raft of survey data, the GDP estimates confirm that it has been more or less business as usual but it doesn’t tell us, however, if this will continue for the foreseeable future.”
Services grew by 0.8% in the quarter. Transport, storage and communication was the strongest part of the service sector, showing a growth of 2.2%, which was the fastest seen since 2009. This was helped along ably by the UK’s film industry.
Analysts had feared the economy would grind to a halt or even contract after the Brexit vote, which has seen some business activity take a substantial hit. The pound has plunged, an indication of investor concern about the country. But the weaker currency also means more exports and increased tourist spending.
“[Consumer spending] clearly benefited from the weakened pound encouraging spending by overseas visitors to the UK. The weakened pound also supported foreign orders for UK goods and services”, said Howard Archer, UK economist at IHS Global Insight.
While the data is important in that it is the most comprehensive reading since the June 23rd vote, experts warn that the numbers are preliminary and that they do not reflect some of the looming negative impacts, such as an expected rise in inflation. Also, the resilience post the referendum does not say anything about Britain’s ability to perform outside of the EU, said Berenb