LONDON, United Kingdom, Apr 27 – Britain’s economy suffered a sharp slowdown in the first quarter with the weakest growth rate since 2012, official data showed Friday in a gloomy sign one year before Brexit.
Gross domestic product expanded 0.1 percent in the three months to the end of March, the Office for National Statistics (ONS) said in a statement which highlighted falling construction work and sluggish manufacturing activity.
That marked the slowest pace for more than five years and compared with an expansion of 0.4 percent in the final quarter of 2017. It also dashed market expectations for growth of 0.3 percent.
GDP — which is the combined value of all the goods and services produced in an economy – was also hurt by the “Beast from the East” freezing weather which lasted from late February through to March.
“Our initial estimate shows the UK economy growing at its slowest pace in more than five years, with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly,” said ONS spokesman Rob Kent-Smith.
Britain is scheduled to leave the European Union in March 2019, after a Brexit referendum that was held almost two years ago.
“It’s a very concerning sign for the economy with just one year to go until Brexit,” XTB analyst David Cheetham told AFP.
“This is the first full quarter since the Bank of England hiked in November and the early signs are not good,” he added.
“When you consider that there has been limited tangible progress on an acceptable Brexit deal in the near two years since the referendum, it is all the more worrying as the deadline approaches.”
Recent data showed UK inflation unexpectedly slowed in March 2.5 percent – the lowest level in a year – undermining the urgency of raising rates.
There was meanwhile frantic trading on the foreign exchange market on Friday.
The news sent the pound sliding against the euro and the dollar, as analysts said it ruled out any remaining hope of an interest rate hike next month.
“A surprisingly weak first-quarter growth figure could well be the final nail in the coffin for a May rate rise,” said ING economist James Smith.
“It now looks more likely than not that the bank will opt to wait until August to buy more time to see how things evolve.”
The Bank of England’s main lending rate stands at 0.5 percent after it increased borrowing costs by a quarter-point in November 2017.
That was the first hike in more than a decade and reversed an emergency cut that it had implemented in the aftermath of the Brexit referendum.
The central bank’s main task is to keep inflation close to a 2.0-percent target.
“The (growth) slowdown will be a big consideration in the Bank of England’s deliberations next month,” noted analyst Danielle Haralambous at the Economist Intelligence Unit.
“This soft GDP number will introduce a lot more caution into the policy discussion, and has seriously called into question the possibility of a rate hike in May.”