UK economy gets end of year boost with growth
By Andy Jalil – Foreign Correspondent — The year appears to be ending on a high note for Britain’s economy which shows a higher growth than was expected. There is a brighter outlook for business output, an improved growth forecast and an upswing in the job market in London’s financial district (known as the ‘City’). A survey from professional services recruiter Morgan McKinley shows the City’s job market picking up pace again following the Brexit vote.
There was a six per cent year-on-year increase in professional jobs available for last month, the first year-on-year rise recorded by the recruiter since the referendum to leave the European Union. Operations director at Morgan McKinley Financial Services, Hakan Enver said: “Heading into the new year with a higher base of jobs compared to last year bodes well for City employment in 2017.” The British Chamber of Commerce (BCC) announced that it has revised up its UK growth forecast for 2016 and 2017.
The economy grew just as fast after the June vote as it did beforehand, official figures showed. Growth for the third quarter, driven by consumer spending as households shrugged off the warnings of the Remain camp, was revised up by the Office for National Statistics (ONS) last week from 0.5 per cent to 0.6 per cent. Statisticians said the figure was also revised up because of better-than-expected expansion in business services and finance. The figure for the previous quarter was revised down by 0.1 points to 0.6 per cent.
The figures suggest there was not even a modest downturn in the immediate aftermath of the decision to leave the EU, but a robust growth. This year’s annual GDP growth rate has been upgraded to 2.1 per cent from 1.8 per cent, as firms continue to invest and household consumption stays relatively strong after the Brexit vote. Growth estimates for 2017 have also been revised upwards slightly, from one per cent to 1.1 per cent.
The BCC director general, Adam Marshall, said: “Many companies have been adopting a ‘business as usual’ approach in the months since the referendum, which has kept conditions buoyant this year and prevented a sharp slowdown in growth.” Ruth Gregory of Capital Economics said: “The latest set of UK accounts leaves the economy looking even stronger after the referendum than estimated. The economy didn’t lose any pace following the referendum.”
There were slowdowns in both the industrial and construction sectors, but these were smaller than previously thought. Darren Morgan of the ONS said: “Robust consumer demand continued to help the UK economy grow steadily.” However, investment uncertainty and likely higher inflation following the devaluation of sterling after the referendum have prompted the BCC to downgrade its forecast of GDP growth for 2018 from 1.8 per cent to 1.4 per cent.
The business group added that inflation may be set to rise to 2.1 per cent and 2.4 per cent in 2017 and 2018 respectively, but this prediction is significantly lower than the Bank of England’s (BoE) forecast, which predicts a peak of 2.8 per cent next year.
Meanwhile the accountancy firm BDO’s business output index, which indicates how businesses expect to perform in the three months ahead, rose from 96.6 in October to 97.1 last month. This was the first increase recorded in 17 months.
This suggests the UK economy has “stabilised”, the accountancy firm said, though in a lower gear than it had been running at before the EU referendum last June. BDO’s employment index also rose, from 100.9 in October to 101.2 in November. “This uptick in business output is a welcome boost during a turbulent time for businesses and the whole economy,” said Peter Hemington, partner at BDO.
While inflation is set to rise next year, the BoE noted that shoppers are benefiting from a supermarket price war which has kept down the price of food. Some companies have switched from foreign to domestic suppliers to hold down the costs.
The Confederation of British Industry (CBI) which was in favour of remaining in the EU admitted that the economy is growing at the fastest pace for a year. It says manufacturers “saw a strong rise in activity in the last three months while high street sales stayed ‘solid’. CBI economist, Alpesh Paleja said: “It’s great to see the economy end the year on the up.”