The economy grew by 0.4 per cent in between July and September, new economic data reveals data.
The figure from the Office for National Statistics reveals faster growth than most economists predicted. Forecasts suggested growth of 0.3 per cent.
The figure for the third quarter makes it more likely the Bank of England will raise interest rates next month.
It will also be crucial as Chancellor Philip Hammond draws up his next Budget, due to be delivered on November 22.
The pound ticked up by around 0.6 per cent against both the euro and the dollar after the economic growth figure was released.
The economy grew by 0.4 per cent in between July and September, faster than most economists predicted, according to new ONS data (pictured)
The pound ticked up around 0.6 per cent against both the dollar (left) and the euro (right) after the economic figures were released
The better than expected figure will seized on by Brexiteers as evidence the economy is resisting turbulence from Brexit.
Many Remain campaigners predicted an immediate recession if Britain voted for Brexit but growth has held up since referendum day.
While the figure is better than expected it is below Britain’s average long term growth rate and suggests the economy will grow by much less than 2 per cent in 2017.
Mr 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.’
Chancellor Philip Hammond (pictured in Downing Street yesterday) said Britain had a ‘successful and resilient economy’ after the new growth figures were released
Shadow Chancellor John McDonnell said: ‘Today’s GDP figures further confirm the impact that seven wasted years of Tory economic policy has had on working households.
‘Economic growth for the majority of 2017 has been below what was expected. In recent weeks leading independent forecasters have slashed growth for next year, and the latest economic data shows wages are still set to fall behind prices – squeezing living standards further.
‘The UK is not growing as fast as many of our trading partners in the EU or the USA, and it is becoming increasingly clear that this government has to use next month’s Budget for a change of direction.’
Work in computer programming, vehicle sales and retail drove economic growth between July and September (pictured)
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 per cent of economic growth, grew by 0.4 per cent in line with the quarter before.
Shadow Chancellor John McDonnell said the figures proved the Tories had wasted seven years of economic growth (file image)
The main drivers came from the business services and finance sector, which climbed by 0.6 per cent for the period.
Industrial production also rose by 1 per cent during the third quarter, boosted by a 1 per cent jump from manufacturing and a 1.5 per cent rise from mining and quarrying.
It helped to counter a lacklustre performance from the construction sector, which fell by 0.7 per cent 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 per cent between July and August this year, the ONS said.
On an annual basis, GDP expanded by 1.5 per cent in the third quarter, compared to the same three months in 2016.
The figure for the third quarter makes it more likely the Bank of England and Governor Mark Carney (file image) will raise interest rates next month
The Bank is facing pressure to take action next month after inflation surged to its highest level for more than five years at 3 per cent in September, upping the financial pressure on households grappling with low wage growth.
While an interest rate hike would reduce inflation, there are warnings that the UK economy is not yet strong enough to handle a rise.
The International Monetary Fund, which cut its forecast for UK GDP this summer, recently raised the growth outlook for every advanced economy aside from Britain because of the uncertainty surrounding Brexit.
Meanwhile, the Organisation for Economic Co-operation and Development (OECD) has suggested a second referendum that reverses Brexit would have a ‘positive’ and ‘significant’ impact on the UK economy.
The Paris-based think tank is currently projecting economic growth of just 1% in 2018, saying the uncertainty of Brexit negotiations is likely to leave the UK without an EU free-trade agreement when it exits in 2019.