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UK economic growth slows in first quarter

Thursday, June 30, 2016 - 19:44
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Britain's economic growth slowed in the first quarter from the previous three months, official data confirmed on Thursday, as business investment faltered on uncertainty before the Brexit referendum.

[LONDON] Britain's economic growth slowed in the first quarter from the previous three months, official data confirmed on Thursday, as business investment faltered on uncertainty before the Brexit referendum.

Gross domestic product (GDP) grew 0.4 per cent, the Office for National Statistics (ONS) said in a final estimate for the period between January and March, ahead of the June 23 EU membership vote.

That was unchanged from the previous figure but marked a slowdown from the fourth quarter of 2015, which was revised up to 0.7-per cent expansion from 0.6 per cent.

"Business investment was highly likely limited by increased business caution ahead of the EU membership referendum," said IHS Global Insight economist Howard Archer.

"It was also disappointing to see exports of goods and services dip." In a shock referendum last Thursday, Britons voted to quit the EU in a so-called Brexit - despite warnings from the government and the International Monetary Fund of a potential recession.

The outcome sparked the resignation of British Prime Minister David Cameron, who backed the unsuccessful Remain campaign and will step down in the autumn.

"We can be confident that the economic recovery has lost further momentum in the second quarter, as Brexit risk began to loom large," added economist Samuel Tombs at Pantheon Macro.

"Even if the referendum had led to continuation of the status quo, the UK's economic recovery would be slowing in response to tighter fiscal policy, moderating employment growth and slowly rising inflation.

"The referendum has turned a bad outlook into a terrible one, and we now expect collapsing business investment, a hiring freeze and much higher inflation to push the economy into recession." The technical definition of a recession is two or more successive quarters of economic contraction.

AFP