UK GDP shrugs off Brexit as it grows 0.5%

In the first release of GDP covering a full quarter of data following the EU Referendum, the Office for National Statistics said this morning that the UK economy grew 0.5% in the third quarter, against a previous quarter rise of 0.7%.

Investors should appreciate that this number was better than predicted for the period in question.

A strong performance in the dominant services sector has driven these latest results and whilst services activity has remained steady, it’s important that we shouldn’t get ahead of ourselves as certain parts of the economy, such as industrial production and construction, have been affected more.

In the immediate aftermath of Brexit, there were some actions taken by the Bank of England to mitigate the negative impacts of the vote by cutting interest rates. This course of action indicated to the market that the Bank of England will be there as and when needed. As a result, confidence did not crash, which is likely to be the reason why economic activity has remained relatively buoyant.

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.

This is however, very dependent on whether we get a ‘hard’ Brexit.