The UK economy grew at 0.6% in Q4 2016, matching the growth levels seen in Q2 and Q3 and giving an annualised growth figure of 2% for the full year. The figures support the idea that the UK economy has not declined badly since the decision to leave the EU which was taken towards the end of Q2. On the other hand, the annualised data for 2016 is weaker than the figure for 2015 which came in at 2.2% which could point to a slowing economy.
Those who expect Brexit to cause significant harm to the UK economy will be quick to point to the fact that actions taken in the immediate aftermath of the vote by the Bank of England helped to maintain investor confidence and shore up the Pound (which in any event fell by almost 17% against the US Dollar over the course of the year (by comparison, the Euro fell by 3.8%). Critically, they would point out that the UK hasn’t even started the process of the EU yet – this is slated for the end of March – and will remain a member of the bloc for a further two years, cushioning the economic blow to the nation.
The Office for National Statistics has credited strong consumer spending with helping to push growth above expectations which forecast Q4 growth of 0.5%. However, as the devaluation of Sterling feeds in to import costs, inflation will rise which will inevitably weaken consumer spending going forward.
The ONS figure is the initial reading of Q4 GDP and will be subject to two further revisions as more comprehensive data becomes available, it is based on roughly half of the data set that will be available for Q4 in the fullness of time.