Economic growth is defying Brexit forecasts and 'picking up pace'

LONDON — Private sector growth picked up pace in the last three months of the year, according to a leading business lobby group.

A survey of 788 firms by the Confederation for British Industry (CBI) showed that the balance of firms reporting a rise in output stood at +17% — the highest level in a year.

While most sectors surveyed by CBI reported an overall uptick in activity, manufacturing grew particularly strongly in the fourth quarter, reaching its highest level in five years. Growth in professional and consumer services accelerated compared to the previous quarter, and sales in the retail sector remained solid.

Many economists and institutions predicted that a vote to leave the European Union would sink the UK into an immediate recession, including Bank of England governor Mark Carney.

However, economic readings since the vote have consistently beat expectations and even the most bearish institutions have since revised their forecasts upwards.

CBI said that growth since the EU referendum had been “stronger than expected,” but warned it still anticipates “a significant slowing further ahead.”

It says that business investment will grow in early 2017 as projects in the pre-referendum pipeline go ahead, but thereafter “uncertainty over the UK’s future relationship with the EU is likely to bear down on expansion plans.”

The group downgraded its growth forecast for 2017 from 2.0% to 1.3% in a November report, and it expects growth to slow further to 1.1% in 2018.

Alpesh Paleja, CBI’s principal economist, said: “It’s great to see the economy end the year on the up, with growth strengthening across the private sector.”

He warned, however, that the economic climate would be weaker next year. “Economic growth is likely to soften next year, as heightened uncertainty hits business investment and higher inflation weighs on household spending,” Palega said.

“With the fresh slate of a New Year on the horizon, British businesses will be looking to the Government for as much clarity as possible on upcoming EU negotiations, and want to work together to develop a post-Brexit economy that sustains growth and prosperity for all.”

NOW WATCH: Drone footage will make you want to book a trip to the Scottish Highlands

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.