The latest official figures show a sharp slowdown in Britain’s economic growth in the first three months of this year.
Briton’s are spending less as inflation rises linked to the fall in the value of the pound after last year’s Brexit vote.
Growth weakened to 0.3 percent in the period from January to March.
That is the lowest it has been in a year and less than half the 0.7 percent level it reached in the final three months of 2016.
Preliminary GDP estimate for Q1 2017 available here https://t.co/6MsxDl6dHF— ONS (@ONS) April 28, 2017
Growth had remained surprisingly strong even in the period after the referendum vote for Britain to leave the European Union.
But now UK consumers are feeling the squeeze on their living standards as the weaker pound feeds through into prices.
The dominant service sector – which accounts for close to 80 percent of the UK economy – saw a big fall in growth.
It slipped to 0.3 percent in the first quarter of 2017, the weakest rate in two years, down from growth of 0.8 percent in late 2016.
Election in focus
With an election due in June Britain’s Finance minister Philip Hammond preferred to focus on that rather than the gloomy growth figures.
He said: “Britain’s economy is forecast to grow at two percent this year. The choice facing the British people on June the 8th is between five more years of strong, stable government under Theresa May that will lock that economic progress in and get the best possible Brexit deal for Britain, or a coalition of chaos under Jeremy Corbyn that will crash our economy again.”
Choice facing the British ppl: strong & stable Govt w/ T May to lock in econ progress vs J Corbyn's coalition of chaos-a risk to our economy— Philip Hammond (@PHammondMP) April 28, 2017
Opposition political parties have accused the governing Conservative party of calling this election early precisely because they knew the economy was softening.
The Labour Party’s economic spokesman John McDonnell said: “There is no hiding from the truth. The Tories’ (Conservatives) economic plan has undermined the UK economy and is a threat to working people’s living standards.
Today’s GDP figures reveal the threat to living standards under the Tories https://t.co/RPkjnfR9cf— John McDonnell MP (@johnmcdonnellMP) April 28, 2017
Further slowing expected
Economists are forecasting that it will slow more in the coming months as inflation pulls ahead of earnings further hitting purchasing power.
Analyst Jeremy Batstone-Carr said: “I think that the UK economy is beginning to wilt. One might argue that the timing of the snap election has just about managed to come in right for the ruling Conservative party because, as 2017 progresses, my sense is that UK economic activity is going to remain pretty subdued. Indeed, one could argue that the UK economy did quite well to avoid an outright contraction over Q1 but that’s small comfort given the deterioration in the service sector, which of course in many respects is a consequence of pressure on real personal disposable incomes”
Detailed sector breakdown of slower Q1 UK GDP growth. Weakening in consumer-facing sectors chimes with recent deterioration in real earnings pic.twitter.com/zi1B1QMWMl— Alpesh Paleja (@AlpeshPaleja) April 28, 2017