Strong retail figures helped the economy defy drastic pre-referendum warnings of chaos if Britain left the EU as the Office for National Statistics said there was ‘very little anecdotal evidence’ to suggest the vote had hit GDP
Brexit had no immediate impact on economic growth in the UK, while household spending surged by the biggest margin since 2007, new figures revealed today.
In the latest sign of the economy defying drastic pre-referendum warnings of chaos if Britain left the EU, the Office of National Statistics said there was ‘very little anecdotal evidence’ to suggest the vote had hit GDP.
The ONS said GDP grew by 0.6 per cent from April to June – up from 0.4 per cent in the first three months of 2016.
A 0.9 per cent surge in household spending – which makes up around 60 per cent of the economy – helped push up economic growth.
It was the biggest annual rise in spending since before the financial crisis and comes after a survey revealed consumer confidence increased at its fastest rate in more than three years this month as fears over leaving the EU eased.
The figures – which included data from the first week after Britain voted to leave the EU – is further evidence of the UK economy confounding dire predictions of a recession.
Retailers have also reported their strongest sales in six months this month and house prices continued to rise despite fears of a housing market crash after Brexit.
Iain Duncan Smith, the former Cabinet minister and leading member of the Leave campaign, said today it was important Theresa may starts the formal process for leaving the EU ‘as soon as possible’ to ensure the uncertainty does not harm future economic growth.
He wants the PM to trigger Article 50 – the formal two-year process for quitting the EU – before the end of March next year.
Mr Duncan Smith said there was no need to stay in Europe’s single market because countries such as Germany would be desperate to agree favourable trade agreements with Britain because of its car industry.
In its second estimate for the period, the ONS said: ‘There is very little anecdotal evidence at present to suggest that the referendum has had an impact on GDP in Quarter 2 2016.’
Business investment appeared to show no impact from uncertainty ahead of the EU referendum vote, increasing 0.5 per cent in the second quarter compared with the first quarter.
Household spending also shrugged off Brexit jitters to grow 0.9 per cent in the three months to June, rising from 0.7 per cent in the quarter before.
Joe Grice, ONS chief economist, said the second quarter GDP result reinforced the picture that the economy grew strongly in April, but remained flat in May and June.
‘Business Investment grew in the second quarter, partly thanks to companies spending on transport equipment such as cars and planes. However, levels of investment remained lower than at the same period last year.
‘Our survey returns, which include the period leading up to and immediately following the referendum, show no sign so far of uncertainty having significantly affected investment or GDP.’
Iain Duncan Smith (pictured), the former Cabinet minister and leading member of the Leave campaign, said today it was important Theresa may starts the formal process for leaving the EU ‘as soon as possible’ to ensure the uncertainty does not harm future economic growth
The second quarter expansion was driven by the strongest performance from industrial production since 1999, rising 2.1 per cent over the period compared with a 0.2 per cent fall in the quarter before.
Britain’s dominant services sector, which accounts for around 79 per cent of the UK economy, also grew by 0.5 per cent in the second quarter, edging down from 0.6 per cent in the first three months of the year.
Output for the services sector grew by 0.2 per cent between May and June, picking up from flat growth between April and May, the ONS said.
Many economists had tipped the UK economy to maintain momentum ahead of Britain’s vote to leave the European Union.
A recent slew of official data covering the first month after the Brexit vote suggests the British economy is also faring better than initially expected.
Warm weather spurred retail sales towards a higher-than-expected rise of 1.4 per cent in July while those on jobseeker’s allowance also tumbled 8,600 to 763,000 between June and July.
Consumer confidence has also risen at its fastest monthly rate in three-and-a-half years in August as Brexit jitters ease, according to the YouGov/Cebr Consumer Confidence Index.
Meanwhile the pound was up 0.1 per cent against the dollar at 1.32 US dollars and slightly ahead against the euro at 1.169 euro.
Speaking this morning, Mr Duncan Smith, a former Tory leader, insisted the UK must leave the EU’s single market, which allows UK businesses to sell goods tariff-free to 500million EU customers – otherwise Britain would continue to surrender control to Brussels.
He suggested Britain could rely on World Trade Organisation (WTO) rules to trade with the EU after Brexit.
However WTO trade rules are seen as the most basic and the terms used for Russia’s trading relationship with Brussels.
Mr Duncan Smith said: ‘Actually, if you look across the European Union, many of those countries now are quite desperate to sort out the relationship with the UK.
‘For example, Germany is going through quite a difficult period right now, their manufacturers are deeply worried about what will happen afterwards, and they want to find a way to make sure that they don’t end up having tariff barriers imposed on them as they export.
‘That, of course, is possible to arrange even under the WTO process.
‘What they want is, and we want, the bottom line is tariff-free access to the market and for them to do the same for us.’
Mr Duncan Smith also downplayed reports of tensions between Boris Johnson, Liam Fox and David Davis, the three Eurosceptic Cabinet ministers who will lead on Britain’s exit from the EU.
Earlier this month, it was reported Dr Fox angered Foreign Secretary Mr Johnson by demanding the Foreign Office be broken up to allow trade with other countries to flourish.
But brushing off suggestions of feuding among the three, Mr Duncan Smith said: ‘I have spoken to them and I am definitely certain that these characters – David Davis, Liam Fox, and Boris Johnson, and the Prime Minister by the way – are very clear that they need to get on with triggering Article 50 as soon as possible early in the new year.
‘When they do that, we will be bound on a course that means Britain will leave and I believe they are all very positive about the outcome that will entail. We will be out and we will do incredibly well.’