The UK economy continued to perform well in the final three months of last year, confounding concerns that the Brexit vote would result in an economic slowdown, according to latest data from the Office for National Statistics (ONS) which also shows the UK was the fastest growing major advanced economy last year
The ONS figures estimate that UK gross domestic product (GDP) increased by 0.6% during Q4 2016, the same rate of growth as in the previous two quarters. For the year as a whole, UK GDP was estimated to have increased by 2% during 2016, slowing slightly from 2.2% in 2015 and from 3.1% in 2014. GDP per head was estimated to have increased by 0.4% during Q4 and by 1.3% during 2016.
Growth in the period October to December was dominated by services, with a strong contribution from consumer-focused industries such as retail sales and travel agency services. Following falls in Q3 2016, construction and production provided negligible positive contributions to GDP growth later in the year.
Darren Morgan, ONS head of GDP, said: ‘The initial ONS data shows the economy ended 2016 with steady growth of 0.6% for the third consecutive quarter.
‘Strong consumer spending supported the expansion of the dominant services sector and although manufacturing bounced back from a weaker third quarter, both it and construction remained broadly unchanged over the year as a whole.’
ONS analysis shows that within the services aggregate, the distribution, hotels and restaurants industry performed strongly, increasing by 1.7%. Retail trade, wholesale trade and the trade and repair of motor vehicles were all strong performers.
The business services and finance industries also performed strongly, increasing by 0.9% in Q4 2016. A particularly strong performer was the travel agency industry, which increased by 7.3%. Growth in transport, storage and communications slowed to 0.3%, following growth of 2.6% in Q3. The ONS says the slower rate of growth was mainly due to a fall back, following a particularly strong Q3 in the motion picture and computer programming and consultancy industries.
Andrew Sentance, senior economic adviser at PwC, said: ‘The UK economy performed slightly better than expected in the final quarter of last year. GDP was up 0.6% on the previous three months, creating a respectable annual average growth rate of 2% for the year as a whole.
‘Strong consumer spending has supported growth over the past three months and this has more than offset the dampening impact of Brexit uncertainty in investment.
‘2017 will be a more testing year for the UK economy as consumer spending will be squeezed by rising inflation. Despite this, we should expect the underlying resilience of the UK economy and healthy global growth to support economic activity in the year ahead. That should enable GDP to grow by close to 1.5% in 2017 even though Brexit uncertainties will have a dampening effect.’