'Very little anecdotal evidence' UK economy hit by Brexit uncertainty

The UK economy continued to grow in the run-up to the Brexit vote, with 'very little anecdotal evidence' to suggest it had been hit by uncertainty surrounding the EU referendum

THE UK economy continued to grow in the run-up to the Brexit vote, with "very little anecdotal evidence" to suggest it had been hit by uncertainty surrounding the EU referendum.

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.6 per cent in the second quarter, up from 0.4 per cent in the first three months of 2016.

In its second estimate for the period, the ONS said: "There is very little anecdotal evidence at present to suggest that the referendum has had an impact on GDP in Quarter 2 2016."

Economists had pencilled in second quarter GDP growth to come in unchanged at 0.6 per cent.

The expansion was driven by the strongest performance from industrial production since 1999, rising 2.1 per cent over the period compared with a 0.2 per cent fall in the quarter before.

The UK's dominant services sector, which accounts for around 79 per cent of the UK economy, grew by 0.5 per cent in the second quarter, edging down from 0.6 per cent in the first three months of the year.

Output for the services sector grew by 0.2 per cent between May and June, picking up from flat growth between April and May, the ONS said.

Many economists had tipped the UK economy to maintain momentum ahead of the UK's vote to leave the European Union.

A recent slew of official data covering the first month after the Brexit vote suggests the UK economy is also faring better than initially expected.

Warm weather spurred retail sales towards a higher-than-expected rise of 1.4 per cent in July while those on jobseeker's allowance also tumbled 8,600 to 763,000 between June and July.

Consumer confidence has also risen at its fastest monthly rate in three-and-a-half years as Brexit jitters ease, according to the YouGov/Cebr Consumer Confidence Index.

In a dramatic turnaround from last month, the index saw its highest monthly bounce since February 2013 of 3.2 points to 109.8 in August.

Ian Stewart, chief economist at Deloitte, said the UK had entered the post-referendum with good momentum.

"Household spending accounts for roughly two-thirds of the economy and is growing at the fastest rate in eight years. We see few signs that Brexit has derailed the consumer recovery," he added.

However, a string of economic surveys covering the period after the UK's decision to ditch the EU suggest the nation should brace itself for a sharp slowdown in economic growth.

Last month, the closely-watched Markit Flash UK Composite Output Index suggested the UK economy had slumped at its fastest rate since the financial crisis, falling to 47.7 in July, compared to 52.4 in June.

Samuel Tombs, chief UK economist for Pantheon Macroeconomics, said the "deterioration of nearly every survey of economic activity" between the first and second quarter suggests economic growth will be revised down eventually.

"Looking ahead, consumers might be able to maintain strong growth in their spending for another quarter, but when inflation picks up in earnest early next year and firms follow through on plans to freeze hiring, they will have to slow down.

"Meanwhile, the slight rise in business investment in the second quarter provides little reassurance about the post-referendum outlook, since few businesses anticipated the Leave vote and surveys suggest firms are recoiling from major financial commitments in third quarter."

"As a result, we continue to see a high risk that the economy enters a mild recession over the coming quarters."

The pound was up 0.1 per cent against the dollar at 1.32 US dollars and slightly ahead against the euro at 1.169 euro.


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