United Kingdom economic growth slowest since 2012

Marco Green
February 12, 2019

Britain's economy slowed past year to its weakest growth rate since the global financial crisis as mounting uncertainty over Brexit weighed on businesses and kept a lid on their investments, official figures showed Monday.

"Declines were seen across the economy in December, but single month data can be volatile meaning quarterly figures often give a better indication of the health of the economy".

Prime Minister Theresa May has rejected the idea of targeting a customs union with the EU and fears are growing that the British leader is playing a game of brinkmanship as she tries to secure backing for her withdrawal agreement ahead of the scheduled Brexit departure date of March 29.

The figure signifies the UK's lowest rate of annual growth since 2012, which also witnessed 1.4 percent growth, and its equal worst performance since 2009, when GDP contracted by 4.2 percent in the wake of a global financial downturn that saw much of the world's banking system brought to its knees.

The statistics agency's head of GDP figures, Rob Kent-Smith, said the slowdown in the last three months of the year was particularly "steep" in vehicle manufacturing and steel production, offset by continued growth in the services sector, which makes up around 80 percent of the British economy. And many trading partners in Europe, such as Germany and Italy, have suffered a slowdown.

In the fourth quarter, business investment fell by 1.4 per cent for the fourth straight quarterly decline - the first time that has happened since the financial crisis.

However, as Brexit day draws nearer, firms are getting edgy.

Chancellor Philip Hammond said the data showed the economy remained "fundamentally strong" and that Britain's Office for Budget Responsibility did not foresee a recession. "I'm afraid this has gone on longer than we would have liked".

"If there's a silver lining from the mounting signs that the uncertainty caused by Brexit is holding back GDP growth, it's that the economy could enjoy a decent rebound if a Brexit deal is agreed", Capital Economics' Chief UK Economist, Paul Dales, wrote in a research note published on Monday.

Some economists have warned a so-called "no-deal" departure could have potentially dire consequences for the United Kingdom economy, with the UK's central bank warning GDP may shrink by up to eight percent and house prices collapse by around a third in such a scenario.

The BoE expects business and housing investment to fall this year, and for export growth to halve.

Analysts were careful not to conclude from the fourth-quarter figures that Britain is heading for a fall in output in the first quarter of 2019, not least because British consumer spending tends to be resilient.

Suren Thiru, head of economics at the British Chambers of Commerce, added: 'It is increasingly likely that the slowdown at the end of 2018 will persist as continued Brexit uncertainty and the raised possibility of a No Deal exit from the European Union weigh heavily on UK's growth prospects'.

"Solid growth in households' spending, thanks to low inflation and robust labour income growth, should keep GDP on a slightly rising path".

Other reports by Click Lancashire

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