Could UK’s economic growth be a ‘one off’?

Emma-Lou Montgomery
Emma-Lou Montgomery
Fidelity Personal Investing9 November 2018

The UK economy grew by 0.6% in the three months to September, with warm weather boosting consumer spending, according to the latest data from the Office for National Statistics.

As had been widely-anticipated, the hot summer weather was behind the rise, pushing GDP growth up from 0.4% in the second quarter and making it the strongest quarterly growth recorded since the final quarter of 2016.

However, unlike the good weather which did - untypically - last all summer, the consumer boost didn’t. The buoyant growth seen in July was offset by a slowdown in August and September. A separate monthly figure for September, generated by the ONS, shows zero growth - as it also did in August. That too had been anticipated though.

It will come as little surprise to either consumers or the businesses that depend on them spending at the tills. And it is at odds with the services sector, which makes up three-quarters of the economy, and which only grew by 0.3% in the three months to September.

Figures, just out from accountancy firm PwC, show that around 14 shops are closing every day as UK High Streets face their toughest trading climate in five years.

In the first six months of this year, a net 1,123 stores closed on Britain's top 500 high streets. Electrical retailers, such as Maplin, which collapsed in February and took 50 stores with it, and fashion, from which you can take your pick of casualties, have borne the brunt of the closures.

Bearing the brunt of retail woes

As shops close and people increasingly shift to purchasing online, restaurants and pubs that traditionally count on providing sustenance and respite to weary shoppers have also suffered. PwC said there was a net decline of 104 fashion shops and 99 pubs as openings failed to replace closures "at a fast enough rate".

According to PwC, which has taken its data from retail chains with more than five outlets, 2,692 shops closed in the first half of 2018 and only 1,569 new stores opened. London has been worst hit, while Wales has seen the least number of closures on its high streets.

The manufacturing sector did better, picking up after a slow second quarter, thanks to strong car manufacturing numbers for the quarter. As did construction, which again saw a slow start to the year, but grew overall by 2.1% over the quarter.

Household spending grew by 0.5% in the quarter, but business investment shrank by 1.2%, suggesting uncertainty among companies over the effects of Brexit. This is the third quarter of falling business investment - the first time this has happened since the financial crisis, suggesting that businesses are being wary.

Analysts are warning that there is little underlying momentum to the July rise which suggests it could very well turn out to be a ‘one off’ event. Growth is widely expected to decline in the final three months of the year.

On the plus-side for mortgagees and other borrowers, the case for raising interest rates looks weaker; especially with inflation heading downwards as well. For income seekers though, the quest continues.

As we have seen so often of late, second-guessing where the economy will go, how political battles will play out and even which sectors will thrive, is increasingly difficult. And that is where active fund managers come into their own.

By putting your investment into the hands of an experienced manager, whose job it is to make your money grow, whatever happens elsewhere, you stand to benefit from their expertise and ensure that by staying invested you stand to make the most of your money.

Invest successfully - whatever the weather

Our Select 50 range of specially-chosen funds offers a world of opportunity, whatever the weather.

If you’re after income we offer the Fidelity Enhanced Income Fund  and the Franklin UK Equity Income Fund , which are both, as their names suggest, income funds. Or cast your net wider with the Fidelity Special Situations Fund  and the JOHCM UK Dynamic Fund .

If a more remainer-friendly Euro pick is your preferred choice, then you can venture across the Channel with the Fidelity European Growth Fund  and Invesco Perpetual European Equity Income Fund .

Or take a global view with Fidelity’s Global Dividend Fund , its Global Special Situations Fund  and the Invesco Perpetual Global Equity Income Fund .


Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Select 50 is not a personal recommendation to buy or sell a fund. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.