UK GDP print shows need to "inspire confidence" in post-Brexit Britain

(Alliance News) - Thursday's economic data pointed to some "troubling" details in the UK economy, analysts noted, as the country's recovery from Covid lags behind G7 peers.

UK gross domestic product shrank by more than initially expected in the third quarter, according to the latest figures from the Office for National Statistics on Thursday.

The UK economy is now estimated to have contracted by 0.3% between July to September. This was downwardly revised from a previous estimate of a 0.2% decline.

The estimates were adjusted due to the additional bank holiday in September for the state funeral of Queen Elizabeth II, which saw businesses close or reduce their operations.

Meanwhile, annual real UK GDP was revised upwards to 7.6% growth in 2021 from 2020, from a previous estimate of 7.5%.

"Despite an upward revision to annual growth in 2021, downward revisions across the quarters of 2022 mean that real GDP is now estimated to be 0.8% below its pre-coronavirus pandemic level, revised from the previous estimate of being 0.4% below," ONS commented.

Pantheon Macroeconomics senior UK economist Gabriella Dickens noted: "The national accounts confirm that the UK was the only G7 economy in which Q3 GDP still was below its pre-Covid level...whereas it was 4.3% above in the US, 2.7% above in Canada, 1.8% in Italy, 1.1% in France, 0.9% in Japan and 0.3% in Germany."

Whilst AJ Bell financial analyst Danni Hewson felt the data mostly confirmed what the market already knew, she noted a few "troubling" details.

"Business investment fell by even more than had been thought and is now a whopping 8.1% below pre-Covid levels," Hewson said.

"Investment is the fuel that helps stoke the embers of a cooling economy and with the UK now at the bottom of the table of G7 countries when it comes to growth, it's clear more needs to be done to inspire confidence that post-Brexit, post-pandemic the UK is worth another look."

Output in the third quarter is now estimated to have fallen by 0.3%, worsened from the first estimate of a 0.2% decline. This mainly reflects revisions to production and construction output estimates, ONS said.

Production output fell 2.5% in the third quarter, marking a contraction for five consecutive quarters. Construction output fell 0.2%, compared to a previous estimate of a 0.6% increase.

"Supply issues might be easing but they're still causing issues for some manufacturers and price pressures and skills shortages are hammering the construction sector despite healthy order books," Hewson said.

On a more positive note, services output grew 0.1% in the third quarter. This was revised upwards from an estimate of flat output.

This was led by growth in education, as well as professional, scientific and technical activities, with public administration and defence also ticking up. However, wholesale and retail sales dropped, as did arts, entertainment and recreation.

By Elizabeth Winter, Alliance News senior markets reporter

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