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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK economy up 0.5% since Brexit vote, Nissan to build new Qashqai in Sunderland – as it happened

A giant graffiti mural depicting the Union Jack in London.
A giant graffiti mural depicting the Union Jack in London. Photograph: Facundo Arrizabalaga/EPA

Closing summary: UK defies Brexit fears, for now...

A man walking his dog in Sunderland this week.
A man walking his dog in Sunderland this week. Photograph: Scott Heppell/AFP/Getty Images

Time for a recap, after a very busy few hours.

Britain’s economy has defied fears that it would be dragged into an immediate recession following the EU referendum.

The first official healthcheck of growth in the last quarter showed that GDP rose by 0.5% between July and September.

That’s slower than the 0.7% recorded in April-June but faster than expected.

The services sector provided all the expansion, though, with growth of 0.8%. Manufacturing, construction and agriculture all shrank, showing that the UK economy remains unbalanced.

Details of UK GDP

Interestingly, film and production provided a major boost to growth. That suggests Britain is benefitting from the new wave of streaming services:

Chancellor Philip Hammond welcomed the news, saying it shows the UK economy is resilient as it begins Brexit negotiations.

But a series of economists have warned that growth will slow further in 2017. Higher inflation will eat into real wages too.

In another boost, Nissan has announced new investment plans for its Sunderland plant. The move guarantees 7,000 jobs, and eases concerns that production could be moved to France.

Prime minister Theresa May says it’s a vote of confidence in the UK.

But what has the government offered Nissan? Ministers are refusing to give details, but that hasn’t stopped the wider car industry seeking guarantees against damage from Brexit.

Labour have warned the government against carving up deals behind closed doors, and instead provide a comprehensive plan for Brexit.

And over in Brussels, Wallonia has dropped its opposition to Europe’s new trade deal with Canada.

That’s probably all for today, unless anything else major happens. I’ll be back tomorrow with more live coverage, including growth figures for France and the US.

Thanks for reading and commenting. GW

Greg Clarke, the UK business secretary, isn’t revealing what the government has promised to Nissan.

According to my colleague Peter Walker, Clarke just waffled through half a dozen questions on the World At One, despite being repeatedly asked if Nissan has been given a deal.

The best we got out of Clarke is this nugget:

There’s no question of financial compensation over tariffs, because we’ve said that what is necessary is that we are going to maintain the competitiveness of the sector.

But otherwise, it was like a rerun of Just A Minute (but without the humour).

Keep an eye on Politics Live for more reaction:

UK car industry wants Brexit assurances

Bang on cue.... Britain’s car industry is demanding assurance that it will be protected from any trade tariffs or migration curbs following the UK’s exit from the EU.

Mike Hawes, chief executive of the Society for Motor Manufacturers and Traders, says:

“Today’s announcement is good news for UK Automotive and jobs, confirming Britain as a leader in automotive production.

To secure this position, however, we need government to provide public assurance to investors that our advantages will be maintained – namely, a competitive business environment, the ability to recruit talent from abroad and the continuation of all the benefits of the single market as we leave the EU.”

Carlos Ghosn is clutching a piece of paper, promising help from the government if Britain’s exit from the EU hurts Nissan.

So says Reuters, which reports:

Britain has given Nissan a written commitment of extra support in the event that Brexit reduces the competitiveness of its Sunderland plant, in return for new production investments by the Japanese carmaker, a source with knowledge of the matter told Reuters.

In addition to unconditional investment aid, Britain pledged in a letter to offer further relief if the terms of Britain’s European Union exit ended up harming the plant’s performance, the source said.

That explains why Nisson has committed to making the Qashqai and the X-Trail in Sunderland. But surely other carmakers are going to want a similar deal, as Buzzfeed’s Alberto Nardelli tweets:

Our political reporter Jessica Elgot has full details of Labour’s reaction to Nissan’s announcement:

John McDonnell, Labour’s shadow chancellor, criticised the deal done with Nissan as a “chaotic” strategy.

In a speech where he had criticised the government for appearing to prioritise financial services over manufacturing and small businesses, said there had been no public discussion of the deal hashed out for the car maker.

“We know nothing about it,” he said. “Are they literally going to decide factory by factory which one gets support? We have to have a comprehensive plan, and this is chaos at the moment.”

“We are trying to get a consensus and heal the divisions the referendum brought and we cannot do that with secret deals behind closed doors. It will divide our country once more.

The first deal looked like it would be protecting financial services, paid for by others. And now with Nissan, other manufacturers are saying what are we going to get? We have to have a comprehensive plan. What we need is more openness and transparency and accountability.”

Nissan Qashqai SUVs being built in Sunderland.
Nissan Qashqai SUVs being built in Sunderland. Photograph: Owen Humphreys/PA

The Unite union are understandably delighted that the 7,000 Nissan jobs in Sunderland are safe, along with thousands more in the supply chain.

Unite assistant general secretary Tony Burke says it recognises the UK car industry’s world-leading status.

“Nissan’s decision is a massive vote of confidence in the skills and expertise of a world-class workforce and testament to their hard work which has made the Sunderland plant one of the most productive in the Nissan family.

Burke says the government must now secure tariff-free access to the single market, to help all UK car markets.

Here’s Labour MP Matthew Pennycook on the Nissan announcement:

Breakthrough in EU-Canada trade deal deadlock

More news! The deadlock in Belgium that was preventing the EU signing a trade deal with Canada has been broken!

Prime Minister Charles Michel has declared that “an agreement” has been reached with the French-speaking communities in Wallonia who sensationally blocked the deal last week.

Cecilia Malmström, the Eu trade commissioner, says it’s an important breakthrough, that could mean the deal can now be signed.

Unfortunately, Canadian prime minister Justin Trudeau has already cancelled his trip to Brussels to sign the deal. (he was due to land today).

And he needn’t pack his suitcase just yet. European Council chief Donald Tusk says he won’t be in touch until all the paperwork is definitely ready.

Updated

Here’s our news story about Nissan’s new commitment to Sunderland:

John McDonnell, Labour’s shadow chancellor, isn’t impressed that Nissan have apparently cut a deal to stay in Sunderland.

Sky’s Faisal Islam has the details:

Nissan’s surprise announcement came just as McDonnell was giving a speech about the economy, which is rather bad luck for Labour (unless the dark arts of political spin are in play...).

Our Politics Live blog has been tracking it though:

Theresa May hails Nissan's Qashqai decision

Prime minister Theresa May says Nissan has given Britain a “vote of confidence”, but she doesn’t reveal what promises she has given the carmaker.....

Updated

Conservative MP Michael Fabricant is rather pleased by Nissan’s announcement:

Nissan: We're sticking with Sunderland following May's Brexit pledge

Nissan technicians preparing doors for the Qashqai car at the company’s plant in Sunderland.
Nissan technicians preparing doors for the Qashqai car at the company’s plant in Sunderland. Photograph: Nigel Roddis/Reuters

It’s official! The next Qashqai will indeed be build in Sunderland, despite the uncertainty over Britain’s future.

Nissan is also pledging to build its next 4x4 X-Trail vehicle there too.

And the company also confirms that Theresa May’s government has given a ‘commitment’ that the plant’s competitiveness won’t be damaged by Brexit.

Here’s the official statement:

Nissan Motor Company Ltd. today announced, following its Executive Committee meeting, that it will produce the next Qashqai and will add production of the next X-Trail model at its Sunderland, U.K. 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.

“I am pleased to announce that Nissan will continue to invest in Sunderland. Our employees there continue to make the plant a globally competitive powerhouse, producing high-quality, high-value products every day,” said Carlos Ghosn, Chairman and CEO of Nissan.

“The support and assurances of the U.K. government enabled us to decide that the next-generation Qashqai and X-Trail will be produced at Sunderland. I welcome British Prime Minister Theresa May’s commitment to the automotive industry in Britain and to the development of an overall industrial strategy.”

Nissan’s Sunderland plant opened in 1986 and has produced almost 9 million cars since. One in three British cars are produced in Sunderland, which is the UK’s largest car plant of all time. In addition, 80% of production from Sunderland is exported to over 130 international markets. More than 2 million Qashqai’s have been built in Sunderland in less than 10 years. In addition to the 7,000 direct employees at Sunderland, the plant supports a further 28,000 British automotive supply chain jobs. To date, Nissan has invested more than £3.7 billion in Sunderland.

Sunderland voted decisively to leave the EU back in June, by 61% to 39%.

So Brexit voters may feel vindicated by Nissan’s decision not to move Qashqai production abroad.

Paul Brand of ITV tweets:

Downing Street will be very pleased by Nissan’s move, says City AM editor Christian May.

Has Nissan managed to get the UK government to promise compensation, if the EU imposes tax barriers on car imports after Brexit?

CEO Carlos Ghosn was pretty clear that he wanted protection from any new tariffs, once Britain leaves the European Union.

After meeting Theresa May on October 14, Ghosn said:

If there are tax barriers being established on cars, you have to have a commitment for car-makers who export to Europe that there is some kind of compensation.

The BBC’s Simon Jack says that Nissan has received “support and assurances” from Theresa May’s government, encouraging it to build the new Qashqai in Sunderland.

The FT’s Peter Campbell predicts an official announcement soon:

Reuters: Nissan to build next Qashqai in Sunderland

Reuters are reporting that Nissan, the Japanese carmaker, has decided that it will build its next Qashqai SUV in Sunderland.

That would be a significant boost for the region, and one of the first major investment decisions since June.

The Nissan plant at Sunderland employs around 7,000 people, and is Britain’s biggest car factory.

Last week Nissan’s chief executive Carlos Ghosn met prime minister Theresa May, and warned that his company could stop investing at Sunderland unless it was protected from any adverse impact from the Brexit vote.

We’ve called Nissan for comment.....

Updated

Today’s growth report shows that the “Brexit bogeyman” hasn’t yet been as scary as initially feared, says Nancy Curtin, Chief Investment Officer at Close Brothers Asset Management.

She writes:

Any lingering concerns over an immediate collapse in growth in 2016 have been officially put to bed, with output continuing to grow in the first major assessment of domestic activity post-referendum. Supportive monetary policy has played a part, while the softer pound has kept factory orders ticking along. These, along with robust consumption, will be key levers of growth.

But Curtin also predicts a slowdown next year:

The quarter on quarter slowdown in the growth rate suggests Brexit uncertainty is having some bite, and it’s likely the ambiguity around the UK’s exit from the EU will take some of the steam out of the long-term growth rate, with anaemic growth likely to become status quo while Article 50 negotiations rumble on.

GDP: Some more detail

I’ve quickly truffled through today’s GDP report to get some colour on how the UK economy performed

1) Services: The only sector to grow, by a punchy 0.8%. All four sub-sectors expanded (that’s distribution, hotels and restaurants; transport, storage and communication; business services and finance; and government and other services).

Growth was particularly strong in the “motion picture, video and TV programme production, sound recording and music publishing activities, and computer programming industries”, apparent.y

2) Industrial production: It suffered a 0.4% contraction. That’s mainly because manufacturing output shrank by a whole 1%. Energy supply fell by 3.6%, water and waste management dropped by 0.2%, while mining and quarrying increased by 5.2%

3) Construction: Output fell by 1.4%, which is the biggest decline since 2012. That’s partly because construction of new housing fell, for the first time in a year.

UK construction

4) Agriculture:

Philip Hammond has also told the BBC that the UK economy is looking strong, as the EU exit talks loom:

TUC: No room for complacency

Frances O’Grady.
Frances O’Grady.

TUC general secretary Frances O’Grady says the government needs to do more to help UK manufacturing (which contracted by 1% after the Brexit vote):

“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.”

Economists: Brexit vote impact will be felt in 2017

Today’s GDP report is an important measure of the health of Britain’s economy after June’s historic referendum.

But several economists say the real test of the Brexit vote will come in 2017, not today.

Here’s PwC’s Andrew Sentance:

Geoffrey Yu, head of UK Investment Office at UBS Wealth Management, predicts that growth will keep slowing:

Anecdotal evidence supports the view that we’re yet to see any meaningful damage as a result of the Brexit vote, at least in the short-term.

“Of course, we should not overlook the lingering sense of uncertainty. Though the economy has fared better than initially feared, we expect that economic growth will slow down relative to the early part of this year.

Jeremy Cook, chief economist at the international payments company World First, says we’ll have a better picture once Theresa May has triggered article 50:

“We have called the UK consumer a hardy beast in the past and in Q3 the beast was back. The services sector singlehandedly drove growth to a 15th consecutive positive quarter and while the ‘little evidence of a pronounced effect’ from the Brexit vote is being seen yet, we think that it will be as gradually obvious as the year comes to an end. The beast will tire as inflation fires arrows at its increasingly weakening hide.”

Updated

Thomas Laskey of Aberdeen Asset Management argues that the Bank of England should get some credit for today’s growth report:

“The data shows that the UK economy fared well in the aftermath of the EU referendum. It confirms what most investors thought: that sentiment bounced back after the initial shock of the result. Growth was fairly strong, at least in part because the Bank of England restarted its bond buying programme and the fact that changes to investment plans take time to play out.

But he predicts slower growth next year:

“The outlooks for growth is pretty uncertain. Brexit has the potential to be extremely costly to the UK and the country could be poorer as a result. We’ve already seen this reflected in sterling’s dramatic drop. Growth will probably slow as import costs increase and people’s incomes fall as inflation rises. We are not out of the woods yet by any means.”

Updated

You can see the GDP report online, here:

Gross Domestic Product, preliminary estimate: July to Sept 2016

Hammond hails GDP report

Chancellor Philip Hammond says today’s report shows that the UK economy is resilient, and ‘well-placed’ to deal with the challenges and opportunities created by the EU referendum.

We are moving into a period of negotiations with the EU and we are determined to get the very best deal for households and businesses. The economy will need to adjust to a new relationship with the EU, but we are well-placed to deal with the challenges and take advantage of opportunities ahead.”

Updated

Anyone remember George Osborne’s plan to rebalance the economy and create a March of the Makers?

Five year’s later, Britain is as dependent on service sector growth as ever:

Britain’s economy has now grown for 15 quarters in a row, and is 8.2% higher than the pre-economic downturn peak in early 2008.

UK’s growth since 2003
UK’s growth since 2003 Photograph: ONS

ONS: Little evidence of Brexit effect

Today’s report shows that Britain has not suffered a Brexit shock, according to Joe Grice, head of the Office for National Statistics.

Grice says:

There is little evidence of a pronounced effect in the immediate aftermath of the vote”

The pound has rallied a little, to $1.225, as traders welcome the GDP report.

Service sector grows, everything else shrank

Britain’s service sector, which makes up three quarters of the economy, is the only part which grew in the last three months.

Service sector output grew by 0.8% in July-September.

  • Construction shrank by 1.4%
  • Agriculture shrank bu 0.7%
  • Industrial production shrank by 0.4%
  • And manufacturing (part of production) shrank by 1%

At first glance, this report suggests that the UK economy has shrugged off the immediate shock of the EU referendum.

It has grown faster than predicted in the gloomier forecasts ahead of June’s vote. Remember, the Treasury said the economy would shrink by 0.1% after a Brexit vote.

On an annual basis, the UK economy grew by 2.3% during the last quarter.

Again, that’s stronger than expected.

UK GDP RELEASED

HERE WE GO! Britain’s economy grew by 0.5% in the three months after the Brexit vote.

That’s down from 0.7% in the second quarter of 2016, showing that growth has slowed.

But it’s also stronger than the 0.3% which economists has expected.

More to follow!

The pound has risen back to $1.224...

Tension is building, with just four minutes until we learn how the UK economy performed after the EU referendum....

Back in April, the Treasury claimed that the economy would shrink by 0.1% for four quarters in a row, if Britain voted to leave the EU.

Today’s GDP report is the first test of that assessment....

[UPDATE: This forecast may have assumed Britain had triggered Article 50 immediately after the referendum].

Updated

A flash of good news from Madrid: the Spanish unemployment rate hit its lowest level since 2009 in the last quarter. But it’s still 18.9%, despite a surge in summer hiring to handle the tourist trade.

Economist Rupert Seggins has tweeted a nice graph, showing how uncertainty spiked after the referendum,but has been dropping to less jittery levels since.

Today’s Q3 growth report is only ‘preliminary’, as it’s mainly based on data from July and August.

That makes it harder to predict, says Jeremy Cook of World First:

Surveys are suggesting a number between 0.1% and 0.4% with consensus estimates looking for a figure of around 0.3% but this is the muddiest figure we will have seen in a while given the collapse in expectations in July and the rebound in August.

Manufacturing may be optimistic but services are not sharing in that joy.

The pound has dropped by almost half a cent this morning, to $1.2202, as traders await the UK GDP report.

Just 45 minutes until we get the UK GDP report for the last quarter!

Bloomberg’s Maxime Sbaihi predicts it will get a mixed reception:

Although the City consensus is that UK growth fell to 0.3% in the last quarter, some forecasts are plumping for a rosier +0.4%.

Ross Finley of Reuters has the details:

HSBC are in the camp predicting that UK growth dipped to 0.3% in the last three months.

But they aren’t ruling out a higher figure, saying:

“The U.K. economy has held up in Q3, defying expectations of a pronounced uncertainty-driven slowdown following the referendum.

Given fairly robust indicators, our forecast is for growth of 0.3% qoq, with risks to the upside.”

Lagarde: Brexit uncertainty is damaging

Christine Lagarde today
Christine Lagarde today Photograph: Bloomberg TV

Christine Lagarde, the head of the International Monetary Fund, has warned that the uncertainty over Brexit is bad for the economy.

Speaking on Bloomberg, Lagarde says firms want to know whether London-based banks will lose their rights to ‘passport’ services across the EU single market.

Britain’s future trade deals are another question mark, making it harder for companies to invest and create jobs.

This uncertainty is “not healthy”, says Lagarde.

But she does welcome the government’s commitment to trigger article 50 by the end of March 2017.

One thing we know now is the timetable.

So for the next two and a half years nothing changes, but everything is changed.

Don’t get too excited if today’s GDP report shows that the economy is still growing, says Kathleen Brooks, research director at City Index.

She predicts that consumer spending will provide the bulk of the growth in the last quarter, as industry and construction struggles over the summer

Industrial production has fallen sharply in recent months; it fell by 0.4% in August. Construction is facing a steeper decline, the latest Office for National Statistics data on construction output has fallen 2% since June.

In contrast, the service sector PMI bounced back after a sharp decline in service sector sentiment in July. We expect this pattern to be repeated in the Q3 GDP report.

And Brooks also fears that 2017 will be tough, as higher inflation eats into real wages.

The Bank of England has slashed its growth forecasts for 2017 to a mere 0.8%, compared with 2.2% for 2016. Consultancy firm PWC is forecasting a gloomier outcome at 0.6% for 2017.

The biggest risk for UK growth is a sharp slowdown in business investment that could become more pronounced in the coming months, once the UK government has triggered Article 50. If the UK looks set to lose its access to the single market, then we may see the consumer show signs of stress, which could knock the UK economy seriously off course, and potentially plunge us into recession.

Today’s GDP figures are the most eagerly awaited since the British economy returned to growth four years ago.

Eric Lascelles, chief economist at RBC Global Asset Management, says.

“This is an extremely high stakes report – the British economy appears to have been surprisingly resilient to the Brexit upset.

“To be clear, some economic damage is still expected, if not of a recession-inducing magnitude.”

That’s via Bloomberg, who reckon the report will “swing the mood of consumers and provide a tool for politicians pushing their view on how tough to be when it comes to actually removing the U.K. from the EU”.

Introduction: WELCOME TO GDP DAY

Good morning.

We’re about to find out how well, or badly, Britain’s economy fared in the immediate aftermath of June’s historic vote to quit the European Union.

At 9.30am, the Office for National Statistics will whip the official growth figures for the third quarter of this year out of its hat.

And we’re expecting to learn that the economy slowed sharply in the July to September quarter. But, GDP probably didn’t go into reverse, despite fears that a Brexit vote would trigger an immediate recession.

Economists predict that the quarterly growth rate probably slowed to around 0.3%, or perhaps 0.4%, down from a healthier 0.7% in the April-June quarter.

That would mean that Britain’s economy has been growing for 15th consecutive quarters.

UK quarterly GDP over the last decade
UK quarterly GDP over the last decade Photograph: ONS

The breakdown of the GDP report will also show how the service sector, manufacturers and construction firms all fared during the last quarter.

The figures are likely to shift the pound, and move the stock markets, especially if growth is markedly stronger or weaker than the City expects.

Other data released since June has suggested that the economy has taken the uncertainty pretty well, with the unemployment rate sticking at 4.9% and consumer spending resilient.

As RBC Capital Markets put it:

It does seem that the impact of the referendum won’t have been as immediate as we and many others had initially expected.

But, the true impact of Brexit will be seen over years, of course, not months, as Robin Bew of the Economist Intelligence Unit tweets:

GDP is obviously the main event. But we’ll also keep an eye on financial results from Barclays and Deutsche Bank, plus cider maker C&C, retailer Debenhams and telecoms group BT.

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