UK Economy Update: Predicted GDP Slowdown Beats Expectation
A slowdown in the UK’s gross domestic product (GDP) had been expected, but growth over the last quarter (Oct to Dec) of 2018 was weaker than the 0.3% predicted by economists, says a report by the BBC. Forecasts of slower growth were predicted due to Brexit uncertainty and a weaker global economy.
Service sector is the only positive GDP contributor
The Office for National Statistics (ONS) figures reveal the UK grew by only 0.2% in Q4 2018. Factors including a decline in factory output and car production are blamed for the slowdown. Head of GDP Rob Kent-Smith commented:
“GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining. However, services continued to grow with the health sector, management consultants and IT all doing well.”
Growth in the services sector was 0.4% in Quarter 4 2018. Simultaneously, production industries contracted by 1.1% and construction contracted by 0.3%. This means the services sector was the only positive contributor to GDP. This is the only time since 2012 that services, construction and production all fell.
Brexit uncertainty casts shadow over economic forecast
The Bank of England’s quarterly report reveals growth this year is forecast to be 1.2%. This is the slowest since 2009 when the economy was in recession. Brexit concerns and slower-than-expected growth in the eurozone and China, are the chief causes, with the chances of the economy entering recession put at 25%.
MPs have dismissed the Chancellor’s forecast of a Brexit “deal dividend” of lower taxes and higher spending. This is a claim made at the 2018 Conservative Party conference and repeated in his Budget speech. The Treasury Committee report, states that it was “not credible” to describe any resultant economic boost from a Brexit deal as a “dividend” when using normal English definitions.
