UK growth stalls in the fourth quarter on global slowdown
Brexit uncertainty also to blame as GDP for 2018 expands at the slowest rate in six years
London— Britain’s economy grew at the slowest pace in six years in 2018 with near flat output in the final quarter, data showed on Monday, as Brexit uncertainty and weaker global growth bite.
The bleak official data comes as the British government seeks to win more time to secure EU concessions on Brexit that could pass parliament and avert a chaotic split from the bloc on March 29. Businesses are on edge with Britain just weeks away from its scheduled departure from the European project after 46 years and still has no firm arrangements in place.
The UK parliament in January roundly rejected a Brexit deal Prime Minister Theresa May had sealed with the remaining 27 EU leaders. With May’s deal on the rocks, a large piece of masonry fell from a British parliamentary building onto a parked vehicle at the weekend in an accident heavy with symbolism.
Monday’s figures followed data last week that showed Britain’s dominant service sector almost ground to a halt in January. “The economy is clearly struggling in the first quarter of 2019 amid serious business and consumer caution resulting from heightened Brexit uncertainties", while weaker global growth is also affecting the figures, noted Howard Archer, chief economic adviser at the EY ITEM Club.
In 2018 GDP growth was 1.4%, down from 1.8% in 2017, the Office for National Statistics (ONS) said on Monday. Growth was only 0.2% in the last three months of 2018, the ONS said.
“Following a pick-up in activity over the summer months — in part due to warm weather and the World Cup — real GDP growth slowed markedly in the final quarter of 2018, with GDP falling by 0.4% in the month of December,” the ONS said. “Construction, production and services output fell in the month, the first time that there has been such a broad-based fall in monthly output since September 2012.”
The data comes after the Bank of England last week slashed its forecast for UK growth this year to 1.2% from 1.7%, blaming the downgrade on a global economic slowdown and “the fog of Brexit”. The central bank last week stressed that Britain’s economic output was also being dragged down by a global slowdown, with growth dampening in China, the US and eurozone.
The point was echoed by analysts reacting to Monday’s data. “Brexit uncertainty is not helping matters on the economic front, but it is probably only a secondary factor in this slowdown, with the primary cause being a drop in overall global activity,” noted David Cheetham, chief market analyst at XTB trading group.
“The eurozone in particular has been especially weak on the data front of late, and the focus now is very much on whether there can be a tangible breakthrough on the trade front between the US and China, with Beijing back after their New Year’s holiday.”
The pound, the main indicator of Britain’s economic health, fell against the euro and dollar in reaction to Monday’s growth data. London’s benchmark FTSE 100 stocks index, which features many multinationals, was higher on hopes of a breakthrough in US-China trade talks.
“Sterling was knocked off course again as a weak GDP print confirmed the slowdown in the economy,” said Neil Wilson, chief market analyst at Markets.com. “We must caution against blaming all on Brexit — global cooling is having the biggest dampening effect on all major economies at present — although we must note that [UK] business investment is collapsing,” he added.