31 Jul 2017
The British Chambers of Commerce has released its monthly economic review for August. The latest data suggests UK economic conditions are becoming more challenging and call for a comprehensive agreement with the EU to be finalised and long standing domestic issues addressed.
One of the most important domestic issues highlighted this month is the upfront cost of doing business in the UK, which BCC suggests, continues to undermine the UK’s long-term growth prospects.
The monthly review covers a number of aspects that contribute to the current state of the UK economy:
The first official estimate for GDP growth in Q2 of 2017 revealed that the UK economy grew by 0.3%, which is a slight improvement on 0.2% growth recorded in the previous quarter. However, this growth is less than half of what was recorded at the end of 2016.
Although the UK economy is growing slightly, remaining on track to grow around 1.5% this year, it will be the weakest growth rate since 2012.
The service sector accounts for all growth recorded in Q2
This estimate of UK GDP shows that economic growth remains unbalanced, with the service sector accounting for all of the growth recorded in the second quarter of 2017.
The service sector accounts for over three quarters of UK economic output and has achieved the best growth in comparison to the industrial production and construction sectors, which have seen a fall in growth by 0.4% and 0.9% respectively. However, output from the agriculture sector rose by 0.6% over the same period.
Despite the recent improvement, trading conditions in the retail sector are expected to become more challenging in the coming months as rising inflation dampens consumer spending.
According to the review, the UK labour market remains resilient. In the three months to May 2017, UK employment rose by 175,000, driven by a 133,000 rise in the number of full time workers.
These figures suggest the UK’s jobs market is edging closer to full capacity. UK labour market conditions may start to moderate over the coming months as uncertainty over the impact of Brexit and the burden of upfront business costs takes its toll on jobs growth. However, the UK jobs market is likely to remain a source of strength for the UK economy.
There remains little evidence that the drop in the value of sterling since the EU referendum is providing a net boost to UK exporters. That said, with economic conditions in key trading markets improving, BCC forecasts that UK exports will grow by 3.1% this year, up from 1.8% in 2016.
To read the whole BCC economic monthly review click here