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“While the pick-up in GDP growth in the third quarter is welcome, the stronger headline figure masks a loss of momentum through the quarter from the particularly strong July outturn, when a number of temporary factors, including the heatwave and the World Cup, boosted activity.
“The services and construction sectors were the strongest performers in the quarter, reflecting a boost in activity from the exceptionally hot summer. The fall in business investment is a concern as it stifles productivity and growth. However, measures such as the increase in the Annual Investment Allowance announced in the Budget should provide a lift to investment over the near term.
“It remains likely that the stronger growth recorded in the third quarter is a one-off for the UK economy, with persistent Brexit uncertainty and the financial squeeze on consumers and businesses likely to weigh increasingly on economic activity in the coming quarters.
“Against this backdrop, the Bank of England’s recent hawkish rhetoric looks a little misguided and risks a further weakening in business and consumer confidence. With inflation on a downward trajectory and the UK’s growth outlook subdued, there remains sufficient scope for the central bank to keep interest rates on hold for some time yet. To ease the extent of current uncertainty, the government must deliver a comprehensive Brexit deal that gives firms the clarity and precision they need.”