Europe Economy

UK 2018 economic growth weakest since 2012, as Brexit and global worries weigh

Key Points
  • "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," ONS statistician Rob Kent-Smith said.
  • Last week the BoE 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.

Britain's economy slowed as expected in the final three months of last year, pushing growth in 2018 to its weakest in six years, as Brexit worries hammered investment, official figures showed on Monday.

Gross domestic product growth in the final quarter of 2018 fell to a quarterly rate of 0.2 percent from 0.6 percent in the previous quarter. This was in line with the average forecast in a Reuters poll of economists though slightly weaker than the Bank of England estimated last week.

A British Union flag, also known as a Union Jack, flies beside a European Union (EU) flag during ongoing pro and anti Brexit protests outside the Houses of Parliament in London, U.K., on Tuesday, Jan. 22, 2019.
Bloomberg | Bloomberg | Getty Images

"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," ONS statistician Rob Kent-Smith said.

For 2018 as a whole, growth dropped to its lowest since 2012 at 1.4 percent, down from 1.8 percent in 2017. Exports suffered from global weakness and consumers and businesses grew increasingly concerned about the lack of a plan for when Britain is due to leave the European Union on March 29. 

Last week the BoE 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.

The final months of 2018 saw concerns about a global slowdown hurt growth across major economies, due in part to trade tensions between the United States and China, and Brexit has remained an added challenge for Britain.

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

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

Less than seven weeks before Britain is due to leave the EU, Prime Minister Theresa May has so far failed to win parliament's backing for the plan she agreed with Brussels to avoid reimposing checks on goods exported from Britain.

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Expecting sharp fall in UK business investment, economist says

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.

Household spending -- which offered an unexpectedly strong boost to growth during the middle of the year -- remained resilient, up 1.9 percent on a year ago. 

Overall, business investment has stalled since June 2016's referendum, which the BoE blames for stagnating economic productivity. 

The BoE expects business and housing investment to fall this year, and for export growth to halve.

Figures on Monday showed that in December alone, Britain's goods trade deficit came in broadly as expected at 12.1 billion pounds.