Services shoring up GDP against post-Brexit slowdown

Chancellor Philip Hammond (centre) talks with James Cooper, CEO of Associated British Ports (right) and Alastair Welch, Associated British Ports director, Southampton (left), during a visit to Eastern Docks in Southampton to coincide with the announcement later of preliminary estitmates for 2016Q3 GDP. PRESS ASSOCIATION Photo. Picture date: Thursday October 27, 2016. See PA story ECONOMY GDP. Photo credit should read: Steve Parsons/PA Wire

Chancellor Philip Hammond (centre) talks with James Cooper, CEO of Associated British Ports (right) and Alastair Welch, Associated British Ports director, Southampton (left), during a visit to Eastern Docks in Southampton to coincide with the announcement later of preliminary estitmates for 2016Q3 GDP. PRESS ASSOCIATION Photo. Picture date: Thursday October 27, 2016. See PA story ECONOMY GDP. Photo credit should read: Steve Parsons/PA Wire

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The UK economy has bucked expectations of substantial slowdown in the three months after the Brexit vote thanks to a “strong performance” from the powerhouse services sector.

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.5% in its first estimate of third-quarter growth, down slightly from 0.7% in the second quarter.

Economists had been pencilling in a steeper fall of 0.3%.

The ONS said there was little evidence of a “pronounced” impact on the UK economy in the immediate fallout of the EU referendum result.

The higher-than-expected GDP figure was driven by the services industry, which grew by 0.8% between July and September.

The boost came from a robust performance from film and TV production, while the release of Ghostbusters, Jason Bourne, The BFG and Star Trek Beyond helped bolster box-office receipts in July.

Chancellor Philip Hammond said the GDP figures show the UK economy is resilient and its fundamentals are strong.

“We are moving into a period of negotiations with the EU and we are determined to get the very best deals for households and businesses,” he added.

“The economy will need to adjust to a new relationship with the EU, but we are well-placed to deal with the challenges and take advantage of the opportunities ahead.”

Services growth was also lifted by transport, storage and communication, which grew at its fastest pace since the fourth quarter of 2009, rising 2.2% over the period in contrast to 0.6% in the second quarter.

It helped to offset the steepest fall in construction since the third quarter of 2012, with the industry dropping 1.4% between July and September this year after a slide in new housebuilding.

Manufacturing dropped by 1% in the third quarter, while production fell 0.4% and agriculture declined by 0.7%.

Separate figures for the services sector, which accounts for more than 78% of the UK economy, showed that output grew by 0.2% between July and August.