Fears that the British economy has been knocked off course by the Brexit vote have been reinforced by signs of retrenchment across key industries, according to fresh reports.
The first health checks of important sectors since Britain voted to leave the European Union overshadowed growth figures, showing a stronger-than-expected performance by the UK in the run-up to the referendum.
An expansion of 0.6% in the British economy between April and June was countered by signals from the construction industry, car factories and high street stores that provide the Bank of England with justification for moving to boost growth when its interest rate-setting committee meets next week.
The City was braced for action – from the Bank and the Treasury – to head off the threat of recession after Thursday’s report. The chancellor, Philip Hammond, made it clear that there would be no repeat of the second quarter GDP growth in the months following Brexit.
Hammond said the UK would at least enter divorce negotiations with the EU from a position of strength after the Office for National Statistics said the best quarterly performance by industry since 1999 had pushed up overall economic growth from 0.4% in the first three months of 2016.
However, Hammond indicated a slowdown was imminent. “Those negotiations will signal the beginning of a period of adjustment, but I am confident we have the tools to manage the challenges ahead, and along with the Bank of England, this government will take whatever action is necessary to support our economy and maintain business and consumer confidence,” he said.
Sterling dropped on the foreign exchanges, despite the growth figures, amid speculation of a package of measures from the Bank’s monetary policy committee on 4 August that might include a cut in the cost of borrowing, a resumption of the quantitative easing money creation programme and incentives to boost lending to households and businesses.