1. ITV Report

UK economy unexpectedly grows by 0.4% in third quarter of 2017

  • Video report by ITV News correspondent Angus Walker

The UK economy unexpectedly rebounded in the third quarter, upping the pressure on the Bank of England to hike interest rates next month.

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.4% in its initial estimate for July to September this year.

The rise is above expectations of 0.3%, as economists predicted growth in line with the first and second quarters of 2017.

It was largely driven by a robust expansion from the services and manufacturing industries, which countered a dismal display from the construction sector.

However, the UK economy is still struggling to bounce back to levels seen in the final quarter of 2016 when GDP rose by 0.7%.

It comes as the Bank's Monetary Policy Committee (MPC) mulls whether to raise interest rates from record lows of 0.25% in November, as inflation continues to soar.

Darren Morgan, the ONS head of national accounts, said: "Growth in the third quarter continued at a similar rate as seen in the first half of the year. "Services, led by increases in IT, motor trades and retail, continued to drive GDP growth.

"Manufacturing also boosted the economy with an improved performance after a weak second quarter.

"However, construction output fell for the second consecutive quarter, although it remains above its pre-downturn peak."

Britain's powerhouse services sector, which accounts for around 79% of economic growth, grew by 0.4% in line with the quarter before.

The main drivers came from the business services and finance sector, which climbed by 0.6% for the period.

Industrial production also rose by 1% during the third quarter, boosted by a 1% jump from manufacturing and a 1.5% rise from mining and quarrying.

It helped to counter a lacklustre performance from the construction sector, which fell by 0.7% between July and September - the lowest drop since the third quarter of 2012.

A separate measure of the services sector - the index of services - showed output growth of 0.2% between July and August this year, the ONS said.

On an annual basis, GDP expanded by 1.5% in the third quarter, compared to the same three months in 2016.

Chancellor Phillip Hammond outside Number 10 Downing Street. Credit: PA

In response to the GDP announcement, Chancellor Philip Hammond said: "We have a successful and resilient economy which is supporting a record number of people in employment.

"My focus now, and going into the Budget, is on boosting productivity so that we can deliver higher-wage jobs and a better standard of living for people across the country.

"That is why I am visiting the Francis Crick Institute, where they are using cutting-edge research to generate real-life health improvements.

"The UK has world-leading expertise in life sciences - an industry that employs hundreds of thousands of people - and it is through supporting growth in these cutting-edge industries that we will build a competitive economy that works for everyone."