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UK economy at weakest since 2012, as Brexit, global worries bite

Reuters  |  LONDON 

By David and Andy Bruce

LONDON (Reuters) - Britain's economy slowed sharply in late 2018, pushing annual growth to a six-year low as worries about Brexit hammered business investment and a weakening global economy weighed on trade, data showed on Monday.

Quarterly growth fell to 0.2 percent between October and December from 0.6 percent in the previous quarter, in line with forecasts in a poll, while output in December alone dropped by the most since 2016.

"Brexit uncertainty, a slowing global economy and the persistent financial squeeze on consumers and businesses (are) increasingly having a suffocating effect on economic activity," British Chambers of said.

Sterling fell a third of a cent to below $1.29 after the data, before recovering.

Businesses are increasingly concerned about the lack of a plan for March 29, when Britain is due to leave the

has faced strong parliamentary opposition to an agreement she reached with to avoid reimposing checks on goods exported from Britain.

For 2018 as a whole, UK growth dropped to its lowest since 2012 at 1.4 percent, down from 1.8 percent in 2017 and weaker than the euro zone, which has outpaced Britain since 2016.

Last week the chopped its forecast for growth this year by 0.5 percentage points to 1.2 percent, which would be the weakest year since the 2009 recession.

Other major economies around the world also slowed in late 2018, due in part to trade tensions between the and

Monday's data showed a net trade deficit lopped more than 0.1 percentage points from Britain's fourth-quarter growth rate. Falling business investment did similar damage.

Japanese carmaker cancelled plans to build a new in Britain last week, saying Brexit uncertainties made it harder to plan for the future.

"GDP slowed in the last three months of the year with the of cars and seeing steep falls and construction also declining," said.

In December alone, the economy contracted by 0.4 percent, the biggest fall since March 2016.

said the data showed the economy remained "fundamentally strong" and that for Budget Responsibility did not foresee a recession.

"The economy has come in ahead of the OBR's forecast for 2018, and that is in the context of a weakening world economy and increasing concerns about trade tensions around the world," he told the

Business investment dropped 3.7 percent in the fourth quarter compared with a year earlier, the biggest fall since the first three months of 2010, when Britain was emerging from recession. Investment has contracted for four consecutive quarters, the longest run since the third quarter of 2009.

Household spending - which offered an unexpectedly strong boost to growth in mid-2018 - remained resilient, up 1.9 percent on a year ago, and government spending picked up.

(Editing by and John Stonestreet)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, February 11 2019. 20:55 IST