THE UK economy has grown at a faster than expected rate over the last year, according to official figures.

In its latest update on the state of the economy the Office for National Statistics (ONS) revised its estimate for third quarter year-on-year growth from 1.5 to 1.7 per cent.

Growth over the three months to September was 0.4 per cent, unrevised from previous estimates but slightly higher than the 0.3 per cent recorded in each of the first two quarters.This may have been lifted by the weak pound leading to more tourists visiting the UK and spending, as well as more people holidaying at home.

Three quarters of this GDP growth was delivered by household spending, with UK households spending more than their incomes in the third quarter of 2017.

Real household disposable household incomes increased by only 0.2 per cent in the three months, while household spending picked up to 0.5 per cent.

Net trade made no contribution to the overall expansion in output, as rising exports were cancelled out by higher imports.

Sterling strengthened after yesterday morning’s announcement, jumping from 1.3372 to 1.3390 against the US dollar.

However, third quarter deficit figures disappointed, after widening by £22.78bn, compared with expectations of £20.2 billion.

This resulted in a fall in the aggregate UK household saving ratio from 5.6 per cent to 5.2 per cent, the second lowest level in 20 years.

The ONS also said that the household sector, after accounting for its investment, has been a net borrower for four successive quarters, the longest run since records began in 1987.

The ONS said the 0.5 per cent increase in household spending between the second and third quarters was the result of consumers running down their savings.

The ONS’s head of National Accounts Darren Morgan said: “[Yesterday’s] unrevised third quarter figures show most of the growth came from the dominant service sector, with accounting, recruitment agencies and retailing all performing well.

“Manufacturing also boosted growth thanks to an increase in exports and the introduction of new car models.

“Meanwhile, household spending and business investment both grew steadily.”

The figures come just days after the International Monetary Fund (IMF) cut its outlook for UK economic growth and said the Government may be forced to make deeper spending cuts following the impact of Brexit.

In its annual review of the UK economy, the IMF said GDP looked set to expand by 1.6 per cent this year, knocking back its prediction of 1.7 per cent growth from October.

Howard Archer of the EY Item Club said: “Economic activity is likely to be hampered during much of 2018 by Brexit uncertainties which could limit business investment in particular. Domestic political uncertainties may also weigh down on business sentiment and behaviour.

“Much will depend on how quickly a transition arrangement can be agreed between the UK and the EU. If a transition arrangement can be agreed early on in 2018, it is likely to provide a boost to investment prospects over the year, although businesses may still be cautious amid considerable uncertainty over the nature of the UK’s future long-term relationship with the EU.”