Brexit slowdown hits UK economy hard
GDP rose 0.2%, less than the 0.3% published late last month and down from 0.7% at the end of 2016
The UK economy slowed more sharply than initially estimated in the first quarter as shoppers flagged and trade dragged on growth.
Gross domestic product rose 0.2 per cent, less than the 0.3 per cent published late last month and down from 0.7 per cent at the end of 2016. Growth in services, the biggest part of the economy, and production were both revised down compared with the initial estimate.
The report from the Office for National Statistics also showed that exports fell 1.6 per cent and net trade knocked 1.4 percentage points off GDP, equalling a record drag. Consumer spending weakened, with household activity adding the least to the economy since 2014.
Deteriorating outlook
The sharper-than-anticipated slowdown is another sign that Brexit is hitting the economy as accelerating inflation coupled with muted wage growth puts the squeeze on households. Economists forecast little pickup in the pace of quarterly expansion through the rest of 2017, and the deteriorating outlook is also reflected in the Bloomberg Brexit Barometer which is now at its weakest since November.
The pound stayed higher against the dollar after the data were released and was at $1.2987 as of 9:45am. London time, up 0.1 per cent on the day.
For consumers and companies, there’s also a surprise election early next month, while the build-up to the Brexit negotiations has been marked by tensions that’s raised questions over what type of deal Britain will be able to forge with the European Union.
The pickup in inflation is largely due to the pound’s 16 per cent plunge since the Brexit vote in June.
That’s also pushing up companies’ import costs, and department store Marks & Spencer Plc this week said it’s a “tough trading environment.”