Brexit round-up: Economy grows in Q3

The UK economy grew in the third quarter, beating predictions in the city that it would begin to slow down after the referendum result.

However, there are calls for chancellor Philip Hammond to use his upcoming Autumn Statement to announce measures to support business investment and productivity.

Here is a round-up of the most important Brexit-related stories this week.

Economy grows after Brexit vote

GDP growth was 0.5% in Q3, according to the Office for National Statistics.

The growth was slower than the 0.7% rate in the previous quarter, but stronger than City of London forecasts of 0.3%.

Growth was driven by a strong performance of the service sector which grew by 0.8% in Q3. However, the other sectors including manufacturing (1%), production (0.4%) and agriculture (0.7%) saw falls in growth following the EU referendum.

Graham Spooner, investment research analyst at The Share Centre, said:

“Whilst it’s too early to call on the long term Brexit effect, the general consensus among economists is to remain relatively cautious as there will be a moderating of economic growth in years to come.”

Deterioration in public finances

Philip Hammond could face ongoing challenges with the public finances over the coming years, according to research by the Resolution Foundation.

The report analyses the economic impact of resetting fiscal policy to boost investment spending and increase support for working families. 

By applying the changes, the chancellor could be faced with a £84 billion borrowing black hole across the 5 years period to 2020/21 with the annual deterioration reaching £23 billion in 2019/20.

Furthermore, this could increase surplus to £13 billion by 2019/20, above the previous £10 billion surplus pencilled by George Osborne. 

Matt Whittaker, chief economist at the Resolution Foundation, said:

“Rather than announcing very significant further tax rises or spending cuts in the face of renewed economic headwinds, the chancellor is right therefore to press the fiscal reset button and set a new economic course for the remainder of the parliament.”

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