Brexit's toll - UK economy at weakest since financial crisis | Eurasia Diary -

24 August, Saturday

Brexit's toll - UK economy at weakest since financial crisis

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Mounting uncertainty over Brexit is weighing heavily on the British economy, which slowed last year to its weakest growth rate since the aftermath of the global financial crisis, official figures showed.

The UK's Office for National Statistics said that the British economy grew by a quarterly rate of only 0.2 per cent during the fourth quarter, down from the 0.6 per cent tick recorded in the previous three-month period. Output actually fell in the month of December, by 0.4 per cent from November, though monthly data are known to be volatile.

For 2018 as a whole, the economy grew by 1.4 per cent, its lowest rate since 2009, when it contracted by 4.2 per cent in the wake of the global financial crisis that had brought much of the world's banking system to its knees.

Statisticians did not directly blame Brexit for the slowdown but there is plenty of evidence showing that the uncertainties relating to the country's departure from the European Union are weighing heavily on economic activity, particularly on business investment. In the fourth quarter, business investment fell by 1.4 per cent for the fourth straight quarterly decline - the first time that has happened since the financial crisis.

With less than 50 days to go to Brexit day on March 29, firms have no idea what the country's new trading relationship with the EU will look like, so they're taking a safety-first approach.

The statistics agency's head of GDP figures, Rob Kent-Smith, said the slowdown in the last three months of the year was particularly "steep" in car manufacturing and steel production, offset by continued growth in the services sector, which makes up around 80 per cent of the British economy

Brexit isn't solely to blame for the slowdown. Trade tensions between the US and China and volatility in financial markets have weighed on global growth. And many of Britain's main trading partners in Europe, such as Germany and Italy, have witnessed a slowdown.

But Britain is generally faring worse than most developed economies and the main reason is Brexit.

"There's little doubt Brexit uncertainty is responsible for the disappointing numbers, though concerns over global trade will also have played a part," said Brettell.

"Today's data bring clear signs that Brexit uncertainty is depressing the economy, but we would not rush to conclude yet that GDP is on track to fall outright in the first quarter," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"Solid growth in households' spending, thanks to low inflation and robust labour income growth, should keep GDP on a slightly rising path."

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