UK GDP rises more than expected in fourth quarter, ONS reveals

The UK economy grew more than expected in the fourth quarter of 2016 despite the uncertainty surrounding Brexit, according to a preliminary estimate from the Office for National Statistics on Thursday.

Gross domestic product rose 0.6% quarter-on-quarter in the final three months of the year, unchanged from the third quarter’s growth and ahead of expectations for a slowdown to 0.5%. Compared to the same period a year earlier, GDP increased 2.2%, also in line with the previous quarter’s annual gain and compared to forecasts of 2.1%.

The ONS said growth in the final quarter was driven by a strong performance in the services sector and improvements in construction and production. It marked the second quarterly GDP release since the UK voted to leave the European Union last June.

The fourth quarter figures mean GDP grew 2.0% in 2016, down fractionally from 2.2% in 2015.

“Today’s UK GDP figures showed that the economy has entered this year in a strong position,” according to Ruth Gregory, UK economist at Capital Economics.

“The 0.6% quarterly rise in GDP in the fourth quarter was above the consensus estimate of 0.5% and was the third 0.6% rise in a row, showing that growth has remained remarkably stable despite the Brexit vote.”

However, the economist said growth looks set to slow in 2017 as higher inflation, caused by a weaker post-Brexit pound, impacts household spending.

On the other hand, Gregory said the slowdown is unlikely to be “too severe” and expects GDP of 1.8% in 2017.

“For a start, the strong end to last year provides a solid base for growth in 2017,” she said.

“What’s more, while the adverse effects of the pound’s fall have yet to be fully felt, the same goes for the beneficial effects too. Indeed, survey evidence suggests that if the pound remains at current levels, past relationships suggests that exporters’ order books will strengthen considerably further during the course of the year.”