Official figures show that the UK economy grew in the third quarter of the year at its fastest pace for nearly two years.
The Office for National Statistics said Friday that the economy expanded by a quarterly rate of 0.6 percent in the July to September period. That’s up from the previous quarter’s 0.4 percent and the highest recorded since the fourth quarter of 2016, just after the country voted to leave the European Union.
The statistics agency said the hot summer weather helped boost consumer spending, particularly of food and drink.
“But even if you took out automotive, the region would still be performing well as an economy.
“So despite a great deal of uncertainty on a national and global scale, there are huge opportunities to build on here in Coventry and Warwickshire.”
Our region bucking the trend
Ajay Desai, Trade Director at the Coventry and Warwickshire Chamber of Commerce, said: “It is great to see Coventry and Warwickshire bucking the trend and I see on a day-to-day basis that companies continue to seek new opportunities to trade overseas.
“The message to the Government has to be that while Brexit dominates the agenda there is plenty that can be done on the domestic front to support business growth.”
Warwickshire has many strengths for business – a strong industrial heritage, transport links in the heart of England, and well educated workers leading hi-tech innovation.
Tom Mongan, General Manager of Nuneaton-based manufacturing company Subcon Laser – which employs 35 staff, said: “There are many reasons why I believe this region continues to buck the trend. We have an incredible location, with superb road, rail and air connectivity which is extremely attractive.
“And, while there is a wider issue around skills, we are blessed with a good level of skilled workers in this region due to the fantastic manufacturing heritage in Coventry and Warwickshire.
“From the major closures of bigger businesses in previous years, smaller companies have emerged in this sector and that has helped the region to keep those skills and, importantly, pass them on to the next generation.
“We are blessed with two fantastic universities – both of which understand and engage with business – alongside other institutions such as WMG and the MTC, as well as some outstanding businesses that are operating on the global stage such as Jaguar Land Rover, LEVC and MIRA .
“Our Chamber of Commerce is extremely proactive in the support it gives to businesses of all sizes and sectors which, again, helps companies to grow and thrive.
“And, finally, it’s a great place to live too, which is vital when attracting the best talent – with a host of world-class attractions on our doorstep, breath-taking countryside and the City of Culture right in the middle.”
UK gross domestic product was estimated to have increased by 0.1% in the first quarter of 2018 which is the slowest pace of growth in five years.
Recent bad weather was attributed as the cause for the downturn in construction and high street spending. Overall, household spending grew by 0.2%, the lowest it’s been for three years.
Additionally, business investment decreased by 0.2% which will no doubt highlight concerns over the strength of the UK economy and it’s ability to maintain stability after it leaves the EU.
Rob Kent-Smith of the ONS said:
“Overall, the economy performed poorly in the first quarter with manufacturing growth slowing and weak consumer-facing services.”
Howard Archer, chief economic advisor to the EY ITEM Club, said:
“The UK economy eked out growth of just 0.1% quarter-on-quarter in the first quarter of 2018. This was the weakest growth rate since the first quarter of 2012. It was down from growth of 0.4% quarter-on-quarter in the fourth quarter of 2017 and 0.5% in the third quarter.
“While first-quarter growth was clearly dragged down by the severe weather seen at the end of February and first half of March, the extent of the slowdown suggests an underlying loss of momentum in the economy.
“Year-on-year growth slowed to 1.2% in the first quarter of 2018, which was the weakest level since the second quarter of 2012. It was down from 1.4% in the fourth quarter of 2017, 1.8% in the third quarter and 2.1% in the first quarter.”
FEARS over the weakness of the UK economy are mounting after the revelation that UK services sector growth remained subdued last month, accelerating only slightly following a dramatic slowdown in snow-hit March.
And employment growth in the services sector slowed further last month, to its weakest pace since March 2017, according to the latest survey from the Chartered Institute of Procurement & Supply.
Chris Williamson, chief business economist at CIPS survey compiler IHS Markit, noted CIPS’s surveys of April activity in the services, manufacturing and construction sectors together pointed to the third-weakest monthly UK economic expansion since the immediate fall-out from the Brexit vote in summer 2016.
He highlighted the fact that the latest all-sector output index, at 53.2, was “historically consistent with the economy growing at a quarterly rate of around 0.2 per cent at the start of the second quarter”.
The all-sector output index had plunged from 54.2 in February to 51.9 in March, amid disruption from the so-called “Beast from the East” weather system.
Mr Williamson said the fact that it had last month failed to recover the ground lost in March underscored “how the economy has slowed since late last year”.
He added: “While anecdotal evidence collected from surveyed companies indicated that the weak PMI (purchasing managers’ index) numbers in March were in part attributable to business being disrupted by heavy snowfall, no such adverse factors were reported in April.
“The surveys have instead indicated that sales, investment and hiring are being hit by uncertainty about the economic outlook as well as sluggish domestic demand, notably among consumers.”
CIPS’s business activity index for the UK services sector edged up from 51.7 in March to 52.8 last month on a seasonally adjusted basis, having tumbled from 54.5 in February.
The April reading signalled the second-slowest monthly pace of services sector growth since September 2016.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said: “It is notable that the April services PMI reading of 52.8 was below the average level of 53.1 achieved in the first quarter of 2018, which had been down from 54.5 seen in the fourth quarter of 2017. It was also clearly below the 2017 average of 54.2.”
He added: “Subdued consumer spending was reported to have held back services activity in April, indicating consumers remain cautious as the extended squeeze on their spending power only gradually eases. Additionally, business spending was seemingly hampered by concerns over the domestic economy.”
Economists believe the chances of a rise in UK base rates when the Bank of England’s Monetary Policy Committee meets next week have reduced dramatically since mid-April, amid a raft of weak economic indicators and dovish comments from Bank Governor Mark Carney.
Figures published last week by the Office for National Statistics showed the UK economy grew by just 0.1% quarter-on-quarter in the opening three months of this year.
Economic growth in Scotland increased in the last three months of 2017 – although new figures showed annual GDP growth was less than half that of the UK.
Scottish Government figures showed a rise of 0.3% from October to December, up from 0.2% the previous quarter.
Growth in Scotland lagged slightly behind the 0.4% rise in GDP seen across the UK in the final quarter of last year.
In Scotland annual GDP growth for 2017 was 0.8% higher than the previous 12 months, with the UK economy growing by 1.8% over the same period.
The Scottish Government restated its determination to boost the economy in the run-up to Brexit, with ministers warning the country must not be “derailed by damaging decisions of the UK Government”.
Scottish Secretary David Mundell said it was “increasingly concerning that a significant gap persists between Scotland’s economy and the rest of the UK”.
GDP in Scotland for the last three months of 2017 was 1.1% higher than it was in the same period of 2016, according to the data.
In the most recent quarter the services sector – which makes up about 75% of Scotland’s economy – grew by 0.5%, while output in the production sector was up by 0.9%
Construction output was estimated to have decreased by 2.6% during October to December – a drop of 6.5% compared to the same period in 2016.
The GDP report said: “This is estimated to be the eighth consecutive quarter of decreasing construction output in Scotland, following a period of exceptionally high growth in the sector during 2014 and 2015.”
Liberal Democrats branded the figures “pathetic”, with economy spokeswoman Councillor Carolyn Caddick stating: “People will be disappointed that for all their speeches SNP ministers have not been able to keep pace with the growth in the rest of the UK. UK growth itself is pretty pathetic.”
Jamie Hepburn, Minister for Employability and Training, said: “With four consecutive quarters of positive growth in 2017, Scotland’s economy continues to show strength. Compared to the same point in 2016, Scotland’s economy grew by 1.1%, growing 0.3% during the final quarter of 2017.”
He added: “These figures are welcome, but we are determined to do more to grow our economy and protect Scotland from the headwinds of Brexit.
“The Scottish Government is investing a record £2.4 billion in enterprise and skills, £4 billion in new infrastructure and £600 million in broadband, to ensure every home or business premise in Scotland has access to superfast broadband and that we can secure the benefits of the digital economy – a commitment unmatched across the UK.
“And we are preparing for the future with investments in a new National Manufacturing Institute and the establishment of the Scottish National Investment Bank.
“As we face the potential impact of Brexit to come, the Scottish Government is determined to protect Scotland’s economy and ensure our potential is not derailed by damaging decisions of the UK Government.”
Mr Mundell said it was “good news” that GDP in Scotland continued to grow.
The UK Government minister added: “I note a modest improvement in Scotland’s important services sector, and encouraging growth in production industries.
“However, it is increasingly concerning that a significant gap persists between Scotland’s economy and the rest of the UK.
“The Scottish Government has the powers to boost productivity and strengthen the economy, and must use them to close this gap. By making Scotland the highest taxed part of the UK, the Scottish Government risks damaging, rather than growing, our economy.”
Despite raising its GDP forecast, the British Chamber of Commerce said it had “serious concerns” over the lack of a plan to protect growth against future challenges.
The Government has become “distracted” by Brexit and failed to stimulate economic growth in the UK, the head of the British Chamber of Commerce (BCC) has said.
The business group raised its GDP forecast for 2018 from 1.1% to 1.4%, and 1.3% to 1.5% for 2019, saying this was a result of stronger than expected consumer spending.
Its first forecast for 2020 predicts growth of 1.6%.
But despite the upgrades, UK growth is set to remain well below the historical average throughout the forecast period.
The latest forecast also implies the country will remain among the worst performing economies in the G7 until 2020 at the earliest.
Dr Adam Marshall, director general of the BCC, said: “Political uncertainty aside, the biggest brake on higher UK growth is a lack of concerted action to ‘fix the fundamentals’ here at home, with Government attention distracted by Brexit.
“The power to kick-start the UK economy, and raise the trend rate of growth above the current sluggish levels, lies in Westminster, not in Brussels – and businesses will respond to action by delivering investment, higher productivity, and the increased wages we all want to see.”
The business group also said it expects public sector net borrowing over the next three years to be £13.4 billion higher than predicted by the Office for Budget Responsibility in last week’s Spring Statement.
In 2017/18, the BCC predict that public sector net borrowing will total £49.7 billion, falling to £45.8 billion in 2018/19 and £34 billion in 2019/20.
Further positive change is expected in the growth of average earnings, which the BCC upgraded from 2.5% to 2.7% in 2018 and forecast rises of 2.9% in 2019 and 3.0% in 2020.
And inflation is expected to decrease, with 2.9% forecast for this year, 2.6% in 2019 and 2.2% in 2020.
The UK’s export performance is expected to remain robust on the back of strong global growth, particularly in key markets such as the Eurozone and US.
Imports are also likely to continue to grow, meaning the contribution of net trade to UK GDP growth over the near term is to be limited.
Dr Marshall said: “While many individual businesses are doing well, the inescapable conclusion from our forecast is that the UK economy as a whole should be performing better than it is, given robust and sustained global growth.
“Although strong global conditions have given the UK a bit of a boost through higher export demand in recent months, we have serious concerns about the potential for further growth here at home when the performance of key trading partners slows.
“Sustained skills and labour shortages are also a real issue, with businesses reporting significant difficulties recruiting and retaining the people they need.”
Suren Thiru, the BCC’s head of economics, added: “Our forecast implicitly assumes a relatively smooth Brexit with a transitional arrangement where trading conditions will be largely unchanged.
“Failure to achieve such an outcome would likely weigh on UK economic activity over the near term.”