UK economy slows down as Brexit gets nearerComments
Britain's economy contracted in December, official figures revealed on Monday, suggesting that uncertainty over whether the country will leave the European Union with or without a deal is starting to hurt.
Data from the UK's Office of National Statistics (ONS) shows that gross domestic product (GDP) contracted by 0.4% in December.
As a result, GDP in the last quarter of the year reached just 0.2% — a sharp decline from the 0.6% registered in the previous quarter. Annual growth was recorded at 1.4%, the lowest level since 2012.
No sector was spared the decline in the last month of the year but over the quarter, services were found to be the most resilient, registering a small bump.
"GDP slowed in the last three months of the year with the manufacturing of cars and steel product seeing steep falls and construction also declining. However, services continued to grow with the health sector, management and IT doing quite well," the ONS' head of GDP Rob Kent-Smith, said in a statement.
"The UK's trade deficit widened slightly in the last three months of the year, while business investment again declined, now for the fourth quarter in a row," he added.
UK economy 'fundamentally strong'
The chancellor of the exchequer sought to downplay the latest figures, arguing that the country's economy "remains fundamentally strong."
"Growth of 1.4% in 2018 means the UK has grown every year for the past nine year, and the OBR (Office for Budget Responsibility) expects it to continue growing in every year of the forecast," he went on.
Meanwhile, International Trade Secretary Liam Fox rejected any suggestion that the slowdown was caused by the UK's imminent exit from the EU.
The country is scheduled to leave the bloc on March 29 and with just 50 days to go until the due date, uncertainty remains over whether the two parties will manage to clinch a deal.
"Clearly there are those who believe that Brexit is the only economic factor applying to the UK economy," Fox said.
"I think you'll find that the predicted slowdown in a number of European economies is not disconnected from the slowdown, for example, in China," he added.
Fox made the comments from Berne, Switzerland, where he was signing a trade continuity agreement to ensure trading between the two countries continues after Brexit.
The international trade secretary is not wrong to say other economies also slowed down last year.
Growth in the eurozone — which comprises 19 EU member states — also amounted to just 0.2% in the fourth quarter, according to Eurostat, matching that of the previous three months.
Over in the US, fourth quarter growth is forecast at 2.7%, significantly lower than the 3.5% recorded between July and September. In China, growth for the year came in at 6.6% — its weakest rate in 28 years.
But Brexit and the uncertainties it engenders for businesses is believed to be weighing in on the British economy.
"The further intensification of Brexit uncertainties, coupled with slowing global economy, has also weighed on our near-term outlook for UK growth," the Bank of England wrote following its December meeting.
It added that "uncertainties had intensified considerably" over the previous months and that these were "weighing on the UK financial markets."
Business confidence in the UK has also been declining. The Institute of Chartered Institute in England and Wales (ICAEW) forecast earlier this month that it will drop to -16.3% in the first quarter of 2019, from -12.3% in the previous quarter.
"Companies at the moment are unclear about the future. Directors have the exceptionally difficult task of explaining within their annual reports the impact Brexit might have on their business models and operations," Michael Izza, ICAEW's chief executive, said in a statement.
"As the roulette wheel continues to spin, UK plc is having to place its bets based on best guesswork — and the stakes could not be higher."