Star Trek helps UK economy beam up from post-Brexit shock
Captain James T Kirk is not usually noted for his business acumen but the commander of the USS Enterprise has provided something of a tonic for a Britain left stunned by the June vote to leave the European Union.
The UK economy grew faster than economists forecast in the third quarter, with services single-handedly ensuring resilience against any Brexit fallout.
The 0.5 per cent expansion was better than the 0.3 per cent median forecast of economists in a Bloomberg survey. Services surged 0.8 per cent, offsetting declines in construction and production, its performance helped by box-office receipts for summer movies including Star Trek and Jason Bourne.
The report covers the period since the vote to leave the EU, as Britain came to terms with a decision that sparked a change of prime minister, a sharp drop in the pound, price spats between companies and the first Bank of England (BoE) interest-rate cut in seven years.
“There is little evidence of a pronounced effect in the immediate aftermath of the vote,” said the office for national statistics’ chief economist Joe Grice. He added that the economy is growing at a rate “broadly similar” to its pace since 2015.
The expansion – although slower than the 0.7 per cent in the three months through June – marked a 15th straight quarter of growth. Only three of 50 economists surveyed by Bloomberg correctly predicted the number, with everyone else forecasting a weaker reading. The BoE, which revised up its estimate last month, saw a 0.3 per cent pace.
The performance may mean the bank is less likely to cut interest rates again. While the governor Mark Carney has said another loosening was possible, accelerating inflation and stronger-than-anticipated growth may stay his hand.
“We believe that this reading is sufficiently strong to convince the Bank of England to refrain from easing monetary policy again” next week, said Alan Clarke, an economist at Scotiabank in London. “There is no need to panic.”
Nevertheless, with economists forecasting that the Brexit effect may take time to filter through the economy, they see growth slowing to about 1 per cent next year, half the pace expected for 2016. Economists at Bloomberg Intelligence in London say there is a chance that a BoE rate cut may only be postponed in November until early next year.
The latest data also show the imbalanced nature of growth, with services adding 0.6 percentage point to GDP. Both production and construction were a drag on growth.
The financial industry accounts for a large portion of services, and its future may be at risk because of Brexit.
Mark Garnier, the UK’s trade minister, said this week that global banks will probably lose their current legal rights to provide services in the EU as Britain splits from the bloc. He said an alternative system that has been floated, known as equivalence, was probably not going to be “good enough” for banks.
“The fundamentals of the UK economy are strong,” said the chancellor of the exchequer, or finance minister, Philip Hammond after the data were released. “The economy will need to adjust to a new relationship with the EU, but we are well-placed to deal with the challenges.”
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Updated: October 27, 2016 04:00 AM