UK sees 'notable slowdown' in growth as Brexit risk hits spending

  • "The economy has experienced a notable slowdown in the first half of this year," warned the ONS
  • Sterling fell slightly following the data release. It was trading at $1.3013, down by 0.08 percent.
Jason Alden | Bloomberg | Getty Images

The U.K. economy grew by 0.3 percent in the three months to June compared to the previous quarter, which was in line with expectations.

However, the Office for National Statistics noted a "notable slowdown" in the first half of 2017. The government agency said construction and manufacturing dragged down the country's economic performance, after registering two consecutive quarters of growth.

Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, said the data confirm that the country's economy was indeed slowing.

"The preliminary estimate of GDP (gross domestic product) confirms that the economy has little momentum because consumers are enduring falling real wages and businesses are holding back from spending due to Brexit risk," he said in a statement.

The slight uptick in the British economy, however, was mainly driven by services and also by film production and distribution, the preliminary data showed Wednesday.

The U.K. had grown at a pace of 0.2 percent in the first quarter of this year. The International Monetary Fund (IMF) downgraded its economic forecasts for the U.K. last Monday. Following weak growth in the first quarter of the year, the IMF decided to lower its GDP forecast to 1.7 percent for this year from 2 percent.

Tombs added: "Looking ahead, we doubt that the economy will regain momentum in the second half of 2017. Retailers haven't fully passed on higher import prices to consumers yet, so the squeeze on real wages has further to run. Meanwhile, firms likely will continue to stockpile cash instead of investing while the outcome of Brexit negotiations remains uncertain."

Sterling fell slightly following the data release, despite the figures coming in line with expectations. It was trading at $1.3013 at 10:00 a.m. London time, down by 0.08 percent for the session.

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