Economy grows at slowest rate since 2013 as industry and construction struggle

THE British economy grew at its slowest pace for more than five years in the first quarter, as it was hit by a significant drop in construction work and sluggish manufacturing activity.

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.1% in its initial estimate for January to March.

It was the weakest quarterly growth since the fourth quarter of 2012 and worse than experts had predicted.

Economists had expected a slowdown to 0.3%.

While many thought the socalled ‘Beast from the East’ would have hit the UK’s economy hardest, official figures showed that recent snowfalls had a relatively small effect on growth.

ONS spokesman Rob KentSmith said: “Our initial estimate shows the UK economy growing at its slowest pace in more than five years, with weaker manufacturing growth, subdued consumer facing industries and construction output falling significantly.

“While the snow had some impact on the economy, particularly in construction and some areas of retail, its overall effect was limited with the bad weather actually boosting energy supplies and online sales.”

The pound tanked against the dollar following the news, falling 0.7% to $1.38.

Against the euro, sterling was down 0.3% at €1.14.

Construction was the biggest drag on GDP, having experienced its most dramatic fall since the second quarter of 2012 — dropping 3.3% over the first three months of the year.

Manufacturing growth slowed to 0.2%, though that was partially offset by a rise in energy production due to colder weather.

The UK’s powerhouse services sector — which accounts for around 79% of the economy — was the biggest supporter of GDP growth in the first quarter, having increased by 0.3%.

However, the longer term trends point to weakening of service sector growth.

It comes amid a squeeze on consumer finances from higher inflation, triggered by the Brexit-induced collapse in the pound, and slow wage growth.

The UK economy is still struggling to bounce back to levels seen in the final quarter of 2016 when GDP rose by 0.6%.

The economic slowdown is likely to play a part in determining the course for interest rates this year. Rate-setters will also have to consider recent easing in inflation rates, with the Consumer Price Index of inflation having dropped back from 2.7% to 2.5% in March — marking a one-year low.

The Bank of England has already warned markets that a rate rise this month is not a certainty.

Meanwhile, the Quarterly Economic Survey for the first quarter showed that the year got off to a poor start in Northern Ireland, with domestic sales balances at their lowest since 2013.

It also stated 76% of firms were experiencing pressures from wages while increased frustration over a lack of Executive was holding back productivity.