Brexit jitters take toll on UK growth
Global slowdown a key factor in economic slump
BRITAIN’S economic growth was sharply curtailed during the fourth quarter, official data due tomorrow is expected to show.
According to the consensus forecast from economists, the figures from the Office for National Statistics (ONS) will show that UK gross domestic product (GDP) grew by 0.3 per cent over the three months to the end of December. For the preceding period, the economy grew by 0.6 per cent.
Martin Beck, senior economic adviser to the EY ITEM Club, explained that the economic growth rate will be down due to Brexit uncertainty hitting domestic economic activity and investment, as well as the slowdown in the global economy. The fourth quarter figure will also look bad in comparison with the abnormally strong growth seen during the preceding three-month period.
Beck said: “GDP for the quarter will be 0.3 per cent. The economy was boosted in the third quarter by the good weather and in the fourth, it got a slight boost from [Brexit] stockpiling. However, that was more than offset by Brexit uncertainty, and a slowdown in Europe and the rest of the world has not helped either. There is a cocktail of things that are not helping UK growth.”
Investec chief economist Philip Shaw said: “We think that the economy stagnated in December. November saw an upside surprise, but we think it will be flat for December, although the data is volatile. For the quarter, we’re looking at 0.3 per cent. It is weaker than the Q3 figure, when we had good weather and the catch-up from the disruption earlier in the year. The other part of the slowdown is also due to lower growth in Europe and the rest of the world.”
Markit chief economist Chris Williamson went further and predicted that the growth could slip to 0.2 or even 0.1 per cent for the fourth quarter. He added: “We expect to see a significant weakening in Q4 GDP compared to the third quarter, which was artificially buoyed by the bounce back from the disruption earlier last year. There is an increased recession risk in the UK and eurozone and it is not just down to Brexit, it has all come at a bad time for global trading conditions.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, forecast growth at a below consensus 0.2 per cent due to poor retail sales in December and disruption to the industrial sector, specifically oil and gas.
However, he said he expects that the weakness will be temporary and that the economy will bounce back: “December’s GDP report will look poor but it should not be taken as a signal that the economy is sliding into recession.”
On Wednesday, the ONS is expected to say that the annual inflation rate, as measured by the consumer price index, fell slightly to 2 per cent last month. It will be the first time in years that inflation has been at the Bank of England’s target level since December 2013.
Shaw said: “Inflation will fall to 2 per cent, it will be the first time in a while that it has hit the Bank’s target. The key drivers here are a fall in petrol prices and the effect of the energy price cap.”