UK has dodged a technical recession, but growth is still at lowest in nine years


The UK’s economy has narrowly avoided falling into a recession, but annual growth fell to its weakest level since 2010.

Gross Domestic Product (GDP), a measure of the country’s economic output, increased just 0.3 per cent between July and September, the Office for National Statistics (ONS) said.

The number fell below economist and market estimations of 0.4 per cent, but it was enough to prevent the UK from entering a recession, when there are two successive quarters of contraction.

In the three months to June, the economy shrank by 0.2 per cent, mostly due to a drop in manufacturing output following the delay to the Brexit deadline. If this had been followed by another period of decline, it would have put the UK into recession for the first time since 2009.

“The underlying momentum in the UK economy shows some signs of slowing,” the ONS said.

Britain’s dominant services sector – which includes everything from retail and banks to education and IT – led the way, growing 0.4 per cent in the quarter. But annual growth was 1.4 per cent, the weakest since the end of 2017.

Different parts of the services sector provided a boost, with an increase in UK-based film and TV production helping the information and communication industry to its sixth consecutive period of growth, as output increased by 0.8 per cent.

Wholesale, retail and motor trades also saw a 0.3 per cent increase in the quarter, accelerating from 0.1 per cent in the previous period.

Meanwhile, manufacturing output was flat despite a jump in car manufacturing for August, when plants which would usually be closed at that time of year continued production.

Many carmakers shifted their annual summer shutdowns to April in order to deal with the immediate aftermath of Brexit. The resulting boost to August output prevented manufacturing from declining, but was not enough to make it grow.

Construction was up 0.6 per cent in the third quarter, recovering from a 1.2 per cent drop in the preceding quarter.

Private housing and commercial projects accounted for a strong increase in new work for the sector, while the Government’s Help to Buy schemes have helped to maintain development of affordable homes.

With an election next month, members of several parties were quick to comment on the latest numbers.

The Chancellor Sajid Javid said the figures were a “welcome sign” that the “fundamentals of UK economy are strong”.

But John McDonnell, Labour’s Shadow Chancellor, said: “The fact that the Government will be celebrating 0.1 per cent growth in the last six months is a sign of how low their hopes and expectations for our economy are.

“Labour will build a high-wage, high-skill economy by investing for growth in every region and nation of the UK.”

Ed Davey, the Liberal Democrats’ Shadow Chancellor, said it was “more proof Brexit economics is a disaster”.

Howard Archer, chief economic adviser to EY Item Club, said the underlying figures point to a “faltering” economy.

“It is clear that the third quarter overstated the economy’s underlying strength, just as the second quarter overstated its weakness and the first quarter its strength,” he said.

“Economic activity has been distorted by a number of factors during 2019, most notably stock-building developments influenced by Brexit deadlines.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said firms had not engaged in as much stockpiling in preparation for a Halloween Brexit as they had for the previous deadline.

“It’s possible that stockpiling occurred to a greater extent at the start of the fourth quarter, though the key point is that quarter-on-quarter growth in the fourth quarter likely won’t be depressed as much as we and most other economists expected. Today’s figures, therefore, come with a silver lining.”

The Institute of Directors’ chief economist Tej Parikh meanwhile said the news was “nothing to celebrate”.

“While high employment has provided some support for the economy, underlying weaknesses in investment and productivity still need addressing.

“With uncertainty likely to persist and a continued slowdown in global markets, the onus is on the new government to stimulate economic activity and move the UK beyond its current yo-yo pattern of growth.”

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