UK now relying on its stretched consumers
london — Britain’s economy relied on its financially-stretched households to power growth in the three months to September as businesses, worried about Brexit, cut investment for the longest period since the global financial crisis, official data indicated.
The figures also showed the country’s balance of payments shortfall was its widest in two years. The Office for National Statistics (ONS) confirmed a preliminary estimate that Britain’s economy grew by 0.6 per cent in the third quarter from the previous three months.
That was the fastest increase since the end of 2016 as consumers spent heavily during the World Cup soccer tournament and a heat wave.
But more recent data suggested growth is slowing sharply ahead of Britain’s exit from the European Union in less than 100 days time, and as the global economy weakens.
Prime Minister Theresa May faces deep opposition in her Conservative Party to the divorce agreement she negotiated with the EU, raising the risk of a “nodeal” departure, something that could hurt the economy.
ONS statistician Rob KentSmith said households spent more than they received for an unprecedented eighth quarter in a row, raising questions about their ability to keep on spending and driving the country’s economy.
Real household disposable income was flat in the third quarter, the second weakest reading since the start of 2017.
“The longer-term picture remains subdued and business investment has now fallen for three consecutive quarters,” Kent Smith said.
The last time businesses cut back on investment for three or more quarters in a row was during the depths of the financial crisis a decade ago.
The Bank of England said on Thursday that companies were scaling back investment due to Brexit uncertainty, although the risk of disruption at the borders had boosted spending on warehousing and port capacity.
The ONS data showed inventories were their highest since the end of 2016, suggesting companies were stockpiling to avoid potential customs delays after Brexit.
Earlier on Friday, private-sector economic surveys showed the weakest consumer sentiment since 2013, and the lowest business morale since 2016’s Brexit referendum, as well as the biggest drop in car production since 2009.
On Thursday the BoE lowered its growth forecasts, predicting quarterly expansion of just 0.2 per cent for last three months of 2018 and the first three months of 2019. —