Has the United Kingdom economy stalled?

29 April, 2018, 00:36 | Author: Billie Castillo
  • Pound Euro exchange rate

Britain's economy grew by just 0.1 percent in the first quarter of 2018, well below the BoE's prediction of 0.3 percent and at the bottom end of economists' forecasts in a Reuters poll, official data showed on Friday.

Britain's economy ground to a halt in the first three months of the year as bad weather piled woes on top of squeezed household finances and a troubled construction industry.

Sterling fell by about one per cent against both the U.S. dollar and the euro as market expectations that the Bank of England would raise interest rates in May for only the second time since the 2008 financial crisis reduced.

GDP growth was the slowest since the fourth quarter of 2012, with construction being the largest downward pull on GDP, falling by 3.3 percent.

Ben Brettell, senior economist at Hargreaves Lansdown said the data shows the economy grew at the slowest pace since the final quarter of 2012.

As usual, services, the dominant sector of the United Kingdom economy, accounted for the majority of growth over the data period.

"It's also worth remembering that industrial production, which grew by 0.7% in the first quarter, will have been flattered by the recovery in oil output following the pipeline outage back in December".

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In a statement, the Shadow Chancellor said: "Today's disappointing GDP figures further confirm that continued Tory austerity cuts are weakening growth".

Asked if uncertainty surrounding Brexit had contributed towards the near-standstill in growth, the Number 10 spokesman said: "Our economy has remained resilient".

And in the face of Brexit and an investment slump, recent Survation polling for the GMB union has shown that more than half of those questioned expect the United Kingdom to slip into recession within the next two years - hardly a ringing endorsement of the Tory economic strategy.

The dismal growth numbers for Q1 must mean pressure on the Bank of England to delay hiking interest rates.

Elsewhere, agriculture dropped by 1.4% compared to the final quarter of 2017, while manufacturing increased just 0.2%. "The agreement on the implementation period was an important step providing certainty for businesses".

A slowdown had been expected in light of cold and snowy conditions during much of the quarter, but the scale of the decline was a surprise and prompted a sharp fall in the value of the pound to seven-week lows.

'We are committed to locking in a bright future and better quality of life for everyone which is why we are investing in our people, building new infrastructure, and supporting our vital public services'.

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