Britain’s economy performed far better than expected in the three months after the EU referendum, ruling out the fears of a technical recession, defined as two consecutive quarters of contraction.
The first official verdict post-Brexit vote shows that gloomy predictions of an economic recession were too pessimistic. According to the figures from the Office for National Statistics (ONS), growth has fallen from 0.7% to 0.5% between July and September. This is ahead of general forecasts of growth of 0.3%.
Most predictions expected to see growth more than halve during this period, with Bank of England policymakers forecasting a growth of 0.1%. Britain’s economy has proven to be relatively resilient since people voted to leave the European Union last June. It has been growing for 15 consecutive quarters.
The International Monetary Fund (IMF) forecasts a growth of 1.8%, making the UK the fastest growing of the G7 leading industrial countries in 2016. The relative resilience of the British economy has been attributed to the willingness of people to keep consuming, and a buoyant services sector.
Chancellor Philip Hammond said that the UK economy was in a good situation to deal with challenges and opportunities produced by the EU referendum:
We are moving into a period of negotiations with the EU and we are determined to get the very best deal for households and businesses, he said. The economy will need to adjust to a new relationship with the EU, but we are well-placed to deal with the challenges and take advantage of opportunities ahead.
However, in contrast to the strength of the services sector, agriculture, construction and manufacturing sectors have shown a weaker picture. Frances O’Grady, the TUC general secretary, said:
British manufacturing is still struggling, and now faces real uncertainty following the vote to leave the EU¦ The government must use next month’s autumn statement to boost Britain’s jobs and wages. This means investing in infrastructure like roads, rail and homes, and raising the national minimum wage.
Next year is expected to be even more challenging than the present one, especially due to the government’s plans to officially initiate the Brexit in March. The IMF predicts that growth will slow to 1.1% in 2017.
Since the EU referendum, the pound has fallen by 18% against the dollar, making imports more expensive. Petrol and clothing prices are expected to rise, which will drive a general increase in cost of living. While inflation rose to 1% in September from 0.6% in August, it’s expected to rise to 3% in 2017, according to the latest ONS data. Predictions seem to indicate that inflation will hit consumers until 2018.
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