Spotlight: Double post-Brexit boost for British economy, but too early for celebrations

Britain's economy grew in the three months immediately after the EU referendum, figures released Thursday revealed.

Just hours later Theresa May's government was given a second big boost when the Japanese car maker Nissan announced it was investing in its massive plant in north-east England.

And while the economic report flew in the face of pre-referendum forecasts of gloom and doom, economists and opposition politicians cautioned the future prospects for the economic climate.

The eagerly awaited report from the Office for National Statistics (ONS) showed that in the third quarter of 2016, spanning July to September, the British economy grew by 0.5 percent, slower than the 0.7 percent growth in the second quarter, but higher than the 0.3 percent predicted by analysts.

The figure shows GDP in the third quarter was 2.3 percent higher than in the same quarter of 2015.

Thursday's figures could be a deciding factor when the Bank of England's Monetary Policy Committee meets next week to decide if the base interest rate should be cut from 0.25 percent. The economic figures make it look unlikely, according to some economists.

Chancellor of the Exchequer Philip Hammond welcomed the ONS figures and said the fundamentals of the British economy are strong, with the date showing that the economy is resilient.

He said: "I am very pleased to see that the economy is still resilient, very strong third quarter growth. That tells us that we go into the period of negotiation for our exit from the EU from a position of strength with the economy doing very well."

Formal Brexit negotiations will not start until next year, but meanwhile all eyes will now focus on next month when Hammond will present his Autumn Statement to MPs in the House of Commons, outlining the government view of the economy and its future plans.

In London, James Sproule, chief economist at the Institute of Directors, said Thursday's growth figures show greater resilience than many expected.

"The first full set of post-referendum results has seen service growth underpin GDP growth. Firms continue to adopt a wait-and-see approach concerning investment, so the challenge to the government in the Autumn Statement will be to bolster the confidence necessary to trigger business spending and investment," said Sproule.

He expected that real test for the economy will come early next year when the currency impact is more fully felt, feeding through into higher prices and causing inflation to rise towards target levels.

Sproule said manufacturing, which saw a fall in output, could prove a leading indicator of how uncertainty could affect Britain's economy.

"Manufacturing firms tend to export more, but also depend upon complex supply chains and imports, so much of the sterling gain has been offset. Future contracts are also likely to be reconsidered in light of uncertainty surrounding the UK's trading relationship with the EU," he said.

"The hoped for export boost from the depreciated sterling does not seem to have materialised, at least in these first few months,"he added.

Rain Newton-Smith, CBI chief economist at the Confederation of British Industry (CBI), said although growth slowed in the aftermath of the EU referendum, it is still higher than many expected just after the vote.

"The government will need to set out an ambitious, pro-enterprise agenda in next month's Autumn statement which will get firms investing now and lift productivity in the future across all UK regions," he said.

Lee Hopley, chief economist at the manufacturers' organisation the EEF, said: "The GDP estimates confirm that it has been more or less business as usual but it doesn't tell us, however, if this will continue for the foreseeable future."

Frances O'Grady, general secretary of the trades union organisation the TUC, said: "We can't yet say what impact Brexit will have on our economy, but these figures show there's no room for complacency."

"British manufacturing is still struggling, and now faces real uncertainty following the vote to leave the EU. The government must use next month's Autumn Statement to boost Britain's jobs and wages. This means investing in infrastructure like roads, rail and homes, and raising the national minimum wage," O'Grady said.

The announcement from Nissan provided icing on an economic plate for Prime Minister May and Chancellor Hammond.

There had been speculation that Nissan may opt to build its future models on the European mainland rather than at its plant in Sunderland. At stake was 7,000 factory jobs and more than 20,000 in the auto supply chain.

In an announcement made in Japan, Nissan said following an executive committee meeting, that it will produce the next Qashqai and will add production of the next X-Trail model at its Sunderland plant.

"Nissan's decision follows the U.K. government's commitment to ensure that the Sunderland plant remains competitive. As a result, Nissan will increase its investment in Sunderland, securing and sustaining the jobs of more than 7,000 workers at the plant," said a company spokesman.

May welcomed the decision, saying that "this is fantastic news for Britain. Nissan is at the heart of this country's strong automotive industry and so I welcome their decision to produce the Qashqai and a new model at their Sunderland plant."

Details of any incentives or packages offered to keep Nissan in Sunderland have not been disclosed.

But winning such a high profile commitment from a major player in the global auto industry will strengthen the arm of the British negotiations with Brussels over a Brexit deal.

The Daily Telegraph said the ONS figures disprove claims by the government Treasury's referendum campaign that a vote to leave the EU would result in a fall in GDP in the third quarter that would herald the start of a recession.

Still, major economists are casting their sights into the first half of 2017 for a clearer picture of Britain's economy as it steers a path towards its divorce from Brussels. Endit