ONS puts quarterly growth at 0.5% but warns annual pace is slowest since 2012

The British economy grew at a faster rate than expected in the final three months of 2017, despite pockets of weaker and more uneven growth triggered by the Brexit vote.

GDP grew by 0.5% in the fourth quarter after expansion of 0.4% in the previous three months, according to the Office for National Statistics (ONS). City economists had forecast growth of 0.4%.

However, officials said the rate of expansion for the year as a whole was the slowest since 2012, having fallen from 1.9% in 2016 to 1.8%. The ONS also said the bigger picture showed weaker and more uneven expansion.

Darren Morgan of the ONS said the boost to the economy came from recruitment agencies, letting agents and office management, adding that there was slow and unsteady growth elsewhere, particularly in consumer-facing sectors.

The UK has suffered over the past year as rising inflation prompted by the slide in the value of the pound after the EU referendum outstrips weak wage growth, denting the spending power of consumers.

“Despite a slight uptick in the latest quarter, the underlying picture is of slower and uneven growth across the economy,” he said.

Hotels, caterers and transport and distribution firms recorded weaker growth owing to constraints on consumer spending, the ONS said. There was also weaker growth across the car industry and for cinemas.

Peter Dowd, the shadow chief secretary to the Treasury, said the latest GDP figures showed “continued Tory austerity” was undermining the UK economy at a time of falling real wages and rising household debt. “We need an urgent change of direction,” the Labour MP said.Despite the pockets of weakness, the acceleration in the fourth quarter reflected solid expansion of 0.6% in the country’s dominant services sector. Manufacturing also had an upbeat three months, rising by 1.3% on the back of a strengthening global and Eurozone economy, which has bolstered UK exports.

The pound extended recent gains made over the past few weeks against the dollar on foreign exchanges to hit almost $1.43, amid speculation that the stronger-than expected reading on the economy may encourage the Bank of England to further raise interest rates after its first rate rise in a decade last year.

The figures come after the employment rate, which measures the proportion of 16- to 64-year-olds in work, hit its joint highest level since comparable records began in 1971. The chancellor, Philip Hammond, said both pieces of economic news were “achievements to be proud of”.

Britain’s economy has proven more resilient than forecast before the EU referendum 18 months ago, helped by improving economic conditions around the world. The fall in the pound after the Brexit vote also helped to strengthen exports.

Economists have said the UK could have performed better still without the vote to leave the EU, having trailed the US, France and Germany, where growth has surged ahead in recent months. The International Monetary Fund forecasts a growth rate of 1.5% for the UK this year, compared with 2.7% for the US and 2.2% for the eurozone.

Britain could have grown almost one percentage point faster at about 2.5% last year without Brexit, according to Kallum Pickering at the City bank Berenberg.

Jeremy Cook, chief economist at payments transfer firm World First, said: “The UK economy is in a chronic crawl at the moment whilst the rest of the world is enjoying a significant skip higher in growth.”

The Bank of England governor, Mark Carney, said the UK should however begin to “recouple” with the world economy later this year, should the UK gain greater clarity over its future trading relationship with Europe in the Brexit negotiations.

Speaking from Switzerland on the BBC Radio 4 Today programme, Carney said Britain then begin to “recouple” with the upswing in growth being enjoyed by the world economy towards the end of this year . “If I can use that term borrowed from Gwyneth Paltrow – [there is the prospect of] a conscious recoupling of the UK economy with the global economy,” he added.