Britain is a member of the European Union, but is not a Eurozone economy, having decided against joining the single currency to date. The EU represents the UK’s largest trading partner (which is why any talk of leaving the EU makes no economic sense) and consequently, the lacklustre recovery and weak demand within the block affects the UK. Equally, the sanctions that Britain and the rest of the Western world have applied to Russia over its perceived interference in the affairs of Ukraine drive down bilateral trade. Add to this picture the fact that global demand is weak at the moment then the fact that the UK has posted a Q3 GDP figure of 0.7% is quite impressive. Indeed, it looks set to make the UK the fastest growing advanced economy – whilst China is the second largest economy in the world and is enjoying a much faster pace of growth, it is still regarded as a developing economy rather than a mature one.
The figure is a preliminary estimate on growth in the June to September period and will be subject to two further revisions as more comprehensive data becomes available. The UK economy has slowed compared to the growth seen in Q2 which came in as 0.9% (data provided by the UK’s Office for National Statistics (ONS)). The growth obtained in Q3 is in line with analysts’ expectations. It implies that the full-year GDP should come in at 3%.
Naturally, political interpretation of the data depends on whether you are in power or in opposition. The UK’s Chancellor of the Exchequer, George Osborne, took an upbeat view: "The UK is leading the pack in an increasingly uncertain global economy”. His opposite number in the Labour party raised the issue that growth was slowing and noted that: "Most people are still not feeling the recovery".
The service sector slipped from growth of 1.1% last quarter to 0.7% in Q3. Figures for manufacturing, construction and agriculture showed growth figures of 0.5, 0.8 and 0.3% respectively.