News | Published February 11 2019

Chancellor remains upbeat in face of GDP growth's last-quarter slowdown

In response to a report published this morning by the Office of National Statistics, which indicated the UK's GDP growth rate falling to 0.2 per cent in the last quarter of 2018, the chancellor has remained positive and stated that "the UK's economy continues to grow".

This was down from 0.6 per cent in Q3 2018, taking growth for 2018 to a total of 1.4 per cent – a figure matching the same level of growth as 2012 that marks the joint-worst performance for the UK since the 2009 recession.

The ONS' breakdown of monthly estimates showed that while October and November remained stable at 0.2 per cent, GDP actually shrunk by 0.4 per cent in the last month of the year.

Head of GDP at the ONS, Rob Kent-Smith, remarked that carmakers and steel producers experienced the most turbulent declines while services output displayed signs of growth: "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.

"Declines were seen across the economy in December, but single month data can be volatile meaning quarterly figures often give a better indication of the health of the economy."

Chancellor Philip Hammond remained nonetheless positive in the face of the downturn in a statement issued on Twitter

"The UK's economy continues to grow and remains fundamentally strong. Growth of 1.4 per cent in 2018 means the UK has grown every year for the past 9 years, and the OBR expects it to continue growing in every year of the forecast.

"The UK is currently enjoying the longest unbroken quarterly growth streak of any G7 nation."

According to The Telegraph, The Bank of England anticipates that growth will slow to 1.2 per cent this year – but a "speedy resolution" to Brexit which alleviates uncertainty could bolster growth for 2019.

Ben Brettell, senior economist at Hargreaves Lansdown, told The Guardian that Brexit was just one of the concerns for the UK economy: "There's little doubt Brexit uncertainty is responsible for the disappointing numbers, though concerns over global trade will also have played a part.

"Business investment – the most Brexit-sensitive element of GDP – dropped 3.7 per cent Q4 against a year earlier, the biggest earlier fall since early 2010."

UK trade secretary Liam Fox echoed the sentiment that the drops were not exclusively Brexit-related in Bern this morning after signing a trade continuity agreement with Switzerland: "Clearly there are those who believe that Brexit is the only economic factor applying to the UK economy.

"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."

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Authored by

Ross Hindle
Senior Editor
February 11 2019

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