GDP Beats Expectations To Increase 0.5% In Q4

This follows growth of 0.4% in the previous quarter and beat expectations, with analysts forecasting it to remain at 0.4%.

Growth between October and December was driven by the services sector which grew 0.6%, particularly the business services and finance sector, which increased 0.8% during the period.

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Growth in manufacturing was partially offset by a significant fall in oil and gas extraction, caused by the repair work made to the Forties pipeline.

The Office for National Statistics said GDP was estimated to have increased 1.8% between 2016 and 2017, slightly below the 1.9% growth seen between 2015 and 2016.

Paul Hollingsworth, senior UK economist at Capital Economics, said although the consensus is the economy will slow to 1.4% this year, he is more optimistic, predicting 2% growth. 

"With inflation dropping back - easing the squeeze on households' real incomes - investment intentions remaining strong and exporters still benefitting from a weaker pound (against the euro at least) and a robust global economy, we continue to think that the economy should continue to grow by about 2%," Hollingsworth said.

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Aberdeen Standard Investments chief economist Lucy O'Carroll said she is underwhelmed by the 2017 growth figures, which were the weakest in five years.

"The quarterly number may have been a little better than expected, but that doesn't change the overall growth story," she said.

"2017 was pretty disappointing, with the UK putting in its weakest growth performance in five years. This is not impressive for a small, open economy that would normally expect to be benefiting from 2017's healthy global pick-up."

O'Carroll said while the numbers may be revised, in the meantime they underline the IMF's "stark" message that "the world economy is doing very nicely, the UK economy less so".

However, she added: "If UK businesses get the clarity that they need from the Brexit negotiations, stronger investment spending could follow." 

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Ben Brettell, senior economist, Hargreaves Lansdown, said growth still looks "lacklustre and somewhat unevenly distributed" but the economy has performed better than predicted following the Brexit vote.

"Bank of England governor Mark Carney said in Davos recently that he expects the UK economy to ‘recouple' with the global economy this year as Brexit negotiations provide greater clarity over our future trading relationship with Europe," he said.

Ahead of the Monetary Policy Committee's rate-setting meeting on 8 February, Brettell said he doesn't think they will be in a hurry to raise rates while growth is anaemic.

"I can't see any rush to raise rates," he said. "Last year's quarter point move seems like a tacit admission that the cut to 0.25% was unnecessary in the first place, rather than the start of a sustained upwards trend. I'd be somewhat surprised if we saw more than one rate rise this year, probably in the autumn."