10 September, 2018

UK GDP growth up by 0.3%

According to the KPMG, if the country transitions a smooth exit from the European Union next year, the UK economy will increase by 1.4%. However, if the result is no-deal Brexit, there will only be a rise of 0.6%.

The chief economist at the accountancy firm, Yael Selfin, informed BBC Radio 4’s Today programme: “What’s driving these numbers is the weak productivity performance that we’ve seen in the UK and we’re expecting to see in the next few years and that’s really the ceiling, if you like, on the growth prospects.”

In the case of a no-deal Brexit, Ms Selfin went on to say: “We could still have a technical recession which is a couple of quarters of negative growth…but what you’re also likely to have is businesses preparing for a new reality therefore investment would inevitably pick up a little bit once we know where we’re heading.”

Chief economist at Panmure Gordon, Simon French, believes that KPMG’s estimate of a 1.4% increase of UK GDP in 2019 is “perhaps even a little optimistic”.

He stated that alongside weak consumer spending “…there’s very little leeway in household finances. The savings ratio – the amount that we are saving for a rainy day or to boost spending – is down at less than 5%.”

According to the ONS, in July this year, UK GDP increased 0.3% and in the three months leading to July, the economy grew 0.6% compared to the 0.4% rise in the three months leading to June.

The head of GDP at the ONS, Rob Kent-Smith, commented on the GDP figures released today. He said: “Growth in the economy picked up in the three months to July. Services grew particularly strongly, with retail sales performing well, boosted by warm weather and the World Cup. The construction sector also bounced back after a weak start to the year.

“However, production fell back, with manufacturing again slipping a little while energy generation and supply fell due to reduced demand.”

In other news, Capital Economics believe that it is very doubtful that on Thursday, the Bank of England’s MPC will vote to increase the interest rate from 0.75% and that the GDP figures released today corroborate that prediction.