The Office for
National Statistics (ONS) has released the latest data on GDP for July to September
2019 suggesting that the UK economy avoided a recession.
Official figures
showed that the UK economy grew by 0.3% in Quarter 3, up from a 0.2%
contraction in Quarter 2. In comparison to Quarter 3 in 2018, UK GDP has grown
by 1%, the slowest rate of quarter-on-year growth in 9 years.
The first half of
2019 saw increased volatility due to the original planned departure from the
European Union. This saw many firms bring forward their activity in the first
quarter of the year and many halting projects or production of products in
Quarter 2. We also saw manufacturing sites such as car producers closing which
also had an impact on GDP for the second quarter of the year.
Heading into Quarter
3, both the service and construction sectors provided positive contributions to
the UK economy. Construction output in Quarter 3 rose by 0.6% following a weak
Quarter 2 performance, however the growth of GDP remains subdued. Monthly estimates
from July to September suggest that construction’s output remained positive due
to housing, private commercial work and infrastructure projects. Often
construction output is determined by a variety of external factors such as
weather conditions, business uncertainty, and the pipeline of activity planned
by both the public and private sector.
Caroline Gumble,
Chief Executive at the CIOB, commented: “It’s good to see that there is growth
in the sector, albeit at a slower rate than earlier in the year.
"The
CIOB has recently written about what we believe the industry needs from the
next government. In order to maintain stability within the sector we want to
see leadership and commitment at a Ministerial level, support for the
industrial strategy and further investment in the regions.
"Securing a
pipeline of well-planned projects and supporting jobs across the UK should be a
priority for the next government, and based on today’s figures, pursuing these
strategies will lead to all around improved economic performance.”
Suren Thiru, Head of
Economics at the British Chambers of Commerce (BCC), said that while there was
welcome confirmation that the UK avoided recession in the third quarter, the
stronger headline figure masks an alarming loss of momentum through the quarter
from a relatively strong July outturn and therefore does little to suggest any
meaningful improvement in UK’s underlying growth trajectory.
The construction
sector continues to add little to overall UK GDP growth: “Despite the pick-up
in growth, a slowing global economy has weakened firms’ cashflow, disrupted
supply chains and stifled investment and is likely to squeeze economic activity
in the fourth quarter and beyond, unless action is taken.
“Against this
backdrop, more must be done to boost the UK’s economic growth prospects. With
interest rates already close to historical lows, the extent to which further
rate cuts are able to significantly stimulate the economy is limited. It is
vital that any incoming government drives the UK’s growth trajectory forward by
investing in infrastructure and incentivising greater business investment.”
Seamus Nevin, Chief
Economist at Make UK, the manufacturers’ organisation, said the "seemingly
never-ending uncertainties surrounding Brexit" have now compounded by
electoral uncertainty and weigh heavily on manufacturing with companies scaling
back output due to a lack of new orders, particularly from the domestic market.
“While the economy
overall has seen a slight pick-up it has been led by the services industry with
only the bounce back in car manufacturing offering some positive impact
following April shutdowns," he added. "Compounding this is the
seventh consecutive month of job losses, with the rate of decline at its
fastest for the past decade.
“With yet another
extension of the Brexit deadline, there is little prospect of the sun peeking
through the clouds for manufacturers anytime soon. Their paralysis is evident
in a lack of business spending and the sector is longing to get back to even a
semblance of normality.”
