The UK economy has avoided falling into recession in the third quarter, but official figures show annual growth has dropped to its lowest pace in almost a decade. New estimates from the Office for National Statistics (ONS) show British GDP rose 0.3% in Q3 from July to September.
Chancellor Sajid Javid welcomed “solid” growth, but business leaders warned it was “nothing to celebrate” and highlighted the disruption for firms caused by two missed Brexit deadlines this year. Economists had forecast 0.4 per cent growth, partly thanks to a temporary lift from companies stockpiling goods ahead of Boris Johnson's "do-or-die" Brexit deadline on 31 October - which has now been postponed. Gross domestic product (GDP) shrank 0.2 per cent in the second quarter of the year and a further contraction between July and September would have meant a recession and dealt a blow to Johnson's hopes of winning a Conservative majority in next month's general election.
The latest official data contains further signs that will worry the prime minister and his chancellor, Sajid Javid. Much of the third-quarter growth came in a strong July, with the economy then slowing down to a 0.1 per cent contraction in September. Monthly figures are more volatile than longer-term measures but the Office for National Statistics said that the underlying momentum in the UK economy "shows some signs of slowing".
Over the year, growth came in at just 1 per cent in the third quarter, compared to the same period 12 months ago - the worst annual performance since early-2010 in the wake of the Great Recession. The service and construction sectors provided positive contributions to GDP growth, despite recent surveys indicating that they were flat or shrinking. An ONS spokesperson said: "Services again led the way with construction also performing well. Manufacturing failed to grow as falls in most industries were offset by car production bouncing back following April shutdowns."
The figures came after ratings agency Moody's warned that it could cut the UK's credit rating because, "The increasing inertia and, at times, paralysis that has characterised the Brexit-era policymaking process has illustrated how the capability and predictability that has traditionally distinguished the UK's institutional framework has diminished." Moody's added, "The decline in institutional strength appears to Moody's to be structural in nature and likely to survive Brexit given the deep divisions within society and the country's political landscape."
Last week, two Bank of England policymakers signalled their own worries for Britain's economic prospects by unexpectedly voting to cut interest rates from 0.75 per cent to 0.5 per cent. The rest of the BoE's rate-setting committee voted to keep rates level.
