The British financial system plunged into reverse in December, with a broad-based droop in financial output finishing the weakest yr for development since 2012.
The Workplace for Nationwide Statistics stated gross home product contracted by 0.4% from the earlier month, fuelled by a fall in spending on the excessive road over the important thing festive procuring interval.
With lower than 50 days to go earlier than Brexit, the figures confirmed all three drivers of development within the British financial system – companies, manufacturing and development – shrank throughout December.
The decline in month-to-month output helped drag down quarter-on-quarter development to a price of 0.2% within the three months to the tip of the yr, barely beneath the Financial institution of England’s expectations and down from a price of 0.6% within the third quarter.
Economists are inclined to deal with the three-month figures, as month-to-month GDP snapshots might be vulnerable to revision, however the scale of the decline in December is more likely to be seen as an indication of the financial system shedding momentum as Brexit attracts nearer.
For 2018 as a complete, GDP development slipped to its lowest since 2012, at 1.4%, down from 1.8% in 2017.
Regardless of the broad-based slowdown, Philip Hammond, the chancellor, stated the newest figures confirmed that Britain’s financial system remained essentially robust.
“The UK is at the moment having fun with the longest unbroken quarterly development streak of any G7 nation,” he stated.
Nonetheless, the newest month-to-month figures revealed that manufacturing output tumbled into recession territory with the sixth consecutive month of falling output. This marked the longest destructive run since September 2008 to February 2009, the depths of the monetary disaster.
Labour and the commerce unions referred to as on the federal government to take the specter of a no-deal Brexit off the desk with the intention to instil extra confidence within the manufacturing sector.
Frances O’Grady, the final secretary of the TUC, stated: “The prime minister’s failure to rule out a no-deal Brexit is harming confidence within the financial system and holding again development.
“With our manufacturing sector in recession, the prime minister should act now to take away the specter of crashing out.”
Manufacturing of vehicles and metal merchandise dropped. Exports suffered from weak international demand, whereas home exercise was constrained by the political deadlock over Brexit in Westminster.
Britain has not been immune from faltering development on this planet financial system over current months, amid a slowdown in demand in China and as commerce tensions escalate between Washington and Beijing. Progress within the eurozone has slumped, with Italy falling right into a recession within the second half of final yr whereas Germany additionally teeters on the brink.
Automobile gross sales in China fell for the primary time in nearly 30 years, whereas new car emissions assessments launched within the wake of the VW emissions scandal have disrupted manufacturing unit output throughout Europe.
The ONS knowledge confirmed that internet commerce minimize greater than 0.1 share factors from the UK’s fourth-quarter development, whereas the commerce deficit – the hole between exports and imports – widened barely within the last three months of the yr.
Regardless of the broader international droop, Britain nonetheless faces distinctive challenges from Brexit which are escalating simply because the world financial system falters.
The newest ONS figures revealed that enterprise funding fell for the fourth quarter in a row – in a primary for the reason that final recession in 2009 – as the dearth of readability over Britain’s future buying and selling relationship with the EU led firms to pause their funding plans.
Yael Selfin, the chief economist on the accountancy agency KPMG, stated: “It’s notably worrying to see enterprise funding contracting considerably once more, as it’ll impression the UK’s longer-term productive capability in addition to productiveness efficiency, and factors at a low vote of confidence from enterprise within the UK’s future.”