UK firms cut investment in second quarter as Brexit nears

GDP growth confirmed at 0.4% quarter on quarter, current account deficit wider

British companies cut their investment in the second quarter of 2018, when Brexit was less than a year away, and the country’s balance of payments shortfall grew more than expected, official data showed. The Office for National Statistics confirmed a previous estimate that Britain’s overall economy grew by a quarterly 0.4 per cent in the April-June period.

But it lowered the annual growth rate in the second quarter to 1.2 per cent from a previous estimate of 1.3 per cent.

It also cut the quarterly growth rate in the first three months of the year, when the country was hit by heavy snow, to 0.1 per cent from 0.2 per cent.

Economic growth in the first half of 2018 was the weakest for a six-month period since the second half of 2011, the ONS said yesterday.

Sterling falls

Sterling fell after the data and briefly touched its lowest level in nearly two weeks against the US dollar.

“Although it has picked up a little from a slow start to the year, underlying economic growth remains persistently below the long-term average,” ONS statistician Rob Kent-Smith said.

The ONS has already published its estimate for GDP growth for the three months to July, which showed the economy running at its fastest pace in nearly a year, helped by hot summer weather and the World Cup, which encouraged consumers to spend.

The revised figures published yesterday suggested companies were taking a cautious approach before Brexit. Business investment fell 0.7 per cent in the second quarter compared with the first — a sharp reduction from a previous estimate that investment grew by 0.5 per cent — and was down for the second quarter in a row. “Investment is being tightly controlled with spend directed to keeping things going but not to expansion. UK is going to lose out on future growth,” Mark Gregory, chief economist at accountants EY, said on Twitter.

– Reuters