British companies increased their investment by more than expected in the three months to September as the economy grew solidly following June's vote to leave the European Union, official data showed on Friday.
Business investment expanded at a quarterly rate of 0.9 per cent in the three months to September, the Office for National Statistics said, beating expectations for a 0.6 per cent rise in a Reuters poll of economists.
The ONS confirmed that Britain’s economy grew 0.5 per cent in the third quarter, helped by a rebound in exports and robust household spending.
While this resembles a much better performance than most economists had expected in the immediate aftermath of June’s Brexit vote, a much bigger test awaits next year.
Rising inflation caused by the pound’s post-Brexit vote plunge looks set to squeeze household spending, while there have been concerns that business investment looks set to slow.
"Investment by businesses held up well in the immediate aftermath of the EU referendum, though it's likely most of those investment decisions were taken before polling day," Darren Morgan, an ONS statistician, said.
“That, coupled with growing consumer spending fuelled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historic average.”
Increased spending
Britain’s households increased their spending by 0.7 per cent in the third quarter, slowing slightly but still helping to drive the economy in the face of uncertainty around Brexit.
Net trade added 0.7 percentage points to economic growth, the biggest positive contribution since early 2014 and helped by strong growth in exports after the pound’s post-referendum plunge.
The economy overall expanded 2.3 per cent versus the same period a year earlier, unchanged from a preliminary estimate.
Britain’s independent budget forecaster said on Wednesday that the economy looks set to slow sharply next year, expanding by around 1.4 per cent, down from about 2.1 per cent this year.
Services output increased 0.8 per cent in the July-September period, compared with a 0.9 per cent slide in manufacturing and a 1.1 per cent drop in construction output.
