THE UK “remains locked on to a low growth trajectory”, British Chambers of Commerce has warned, after official figures revealed third-quarter expansion remained far below trend.
Data from the Office for National Statistics (ONS) showed UK gross domestic product grew by just 0.4 per cent in the third quarter. This is equivalent to an annualised pace of around 1.6 per cent, well adrift of a long-term average annual rate of UK expansion put previously by Bank of England Governor Mark Carney at about 2.75 per cent.
The UK grew by only 0.3 per cent in each of the first and second quarters of this year.
Its third-quarter growth of 0.4 per cent was slightly ahead of the 0.3 per cent expansion projected by economists.
This slightly greater-than-expected growth fuelled speculation that the Bank of England’s Monetary Policy Committee might raise UK base rates by a quarter-point, from their record low of 0.25 per cent, when it meets on November 2.
Sterling rose on the back of the rate-rise talk. The pound was trading around $1.3252 at 5pm yesterday, up nearly 1.3 cents on its close in London on Tuesday.
A Reuters poll published on Tuesday showed 46 of 64 economists surveyed expect a quarter-point rise in benchmark UK interest rates next week, even though three-quarters think it is not the right time for such a move. Members of the nine-strong MPC have in recent weeks offered a wide variety of views on whether or not rates should be raised at this stage.
Suren Thiru, head of economics at British Chambers of Commerce, said yesterday: “While GDP growth in Q3 was a slight uptick on the previous quarter, the UK’s combined economic growth performance over the first nine months of 2017 was still the weakest since late 2012, and indicates that the UK economy remains locked on to a low growth trajectory.”
Scottish Chambers of Commerce chief executive Liz Cameron last week urged against a rise in base rates, after ONS figures showed annual UK consumer prices index inflation had climbed from 2.9 per cent in August to three per cent last month. Annual CPI inflation, which had been at 0.3 per cent in May last year ahead of the Brexit vote and has been fuelled by sterling’s woes since the referendum, is well above the two per cent target set for the Bank of England by the Treasury.
Mr Thiru said: “With the latest GDP data confirming that the UK economy is still in a challenging period, these figures are likely to weigh on whether the MPC will raise interest rates next month. We would urge the MPC to proceed with caution on raising rates, as tightening monetary policy amid the current economic and political uncertainty could weaken growth.”
Frances O’Grady, General Secretary of the Trades Union Congress, blamed weak growth on UK Government policies.
She said: “Limp growth is not bad luck - it’s the result of bad political choices. The Government has left us trailing our competitors for investment, and it shows. You can see it in falling wages, poor productivity, our big trade deficit and the poor quality of so many jobs.”
The ONS figures show UK manufacturing output grew one per cent quarter-on-quarter in the three months to September. It fell 0.3 per cent in the second quarter. Growth of the key services sector was muted, at 0.4 per cent. Construction output dropped by 0.7 per cent.
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