Britain’s economy suffered in the three months to June, with shoppers hit by the pound’s tumble.
• Household spending flags and business investment freezes amid rising inflation and political uncertainty ahead of EU exit
Britain’s economy suffered on all fronts in the three months to June, with shoppers pinched by the pound’s tumble, exports failing to fill the gap and investment frozen by Brexit uncertainty.
The Office for National Statistics confirmed on Thursday the economy grew 0.3% in the second quarter after 0.2% in the first — adding up to the slowest growth for any major advanced economy since the start of 2017.
The data showed negligible growth in household spending and flat business investment.
A separate report suggested the malaise will continue. The Confederation of British Industry said retail sales growth slowed in August at the fastest pace in more than a year.
In 2016, Britain surprised most economists by continuing to grow strongly during the six months after the June vote to leave the EU.
The growth was powered by robust consumer spending, despite a fall of about 15% in the value of the pound after the financial markets downgraded Britain’s long-run prospects following the Brexit vote.
But Thursday’s figures showed household spending is flagging, with the weakest quarterly and annual growth since late 2014. Investment and foreign trade failed to compensate, despite a weaker currency and strong global economy.
Consumer price inflation rose to a four-year high of 2.9% in May as a result of the weaker pound and real-term growth in household spending slid to a quarterly rate of 0.1% in the three months to June, the statistics office said.
Flat year-on-year business investment undershot expectations for a modest 0.5% rise, while net trade contributed nothing to quarterly growth and acted as a 0.5% drag on Britain’s annual performance.
“The most recent three months’ growth has been almost entirely reliant on spend- ing by households and government ... which doesn’t feel like the most stable of foundations for a post-Brexit economy,” said Lee Hopley, chief economist for manufacturing trade body, EEF.
Barclays said the data were “highlighting just how much businesses are holding back investment in the face of high levels of uncertainty”.
Britain started formal talks to leave the EU in June, but businesses complain that progress appears to be slow in light of the fixed deadline to leave in March 2019.
EU negotiators want agree- ment on membership dues, existing EU immigrants’ rights and Britain’s land border with Ireland before starting more substantive talks on future trade arrangements later in 2017.
Other official data on Thursday showed net migration to Britain fell to a three-year low of 246,000 in the 12 months to March, as fewer EU immigrants arrived and growing numbers left. British farms, food processors and restaurants — which rely heavily on migrant workers — complained on Thursday that they faced labour shortages.
High immigration has been a key component of British economic growth since the financial crisis. On a per capita basis, Britain’s economy grew just 1% in the year to the end of June, its weakest rate in a year. Total growth was 1.7%, one of the weakest readings in four years.
The Bank of England said earlier in August that it expected the economy to grow 1.6% in 2017 — slower than it had previously forecast but in line with economists’ expectations.
While it expects growth in household consumption to slow to 1.75%, it forecasts export volumes will rise 3.5% and business investment will increase 1%. /