UK business investment falls ahead of EU referendum

[LONDON] Business investment in Britain fell in annual terms for the first time in three years in the first quarter amid uncertainty around a vote on the country's European Union membership.

The Office for National Statistics confirmed the economy slowed in the January-March period, rising by a quarterly 0.4 per cent as expected in a Reuters poll, and the data showed consumers continued to drive the economy.

The economy grew by 2 per cent versus a year ago, against expectations that the data would confirm an initial estimate of 2.1 per cent annual growth in the first quarter.

Many economists expect growth in the April-June period to slow further.

Business investment fell by 0.4 per cent year-on-year in the first quarter after rising 3 per cent in the fourth quarter of last year.

The ONS said the fall was driven by weaker investment in offices and other non-residential buildings.

Economists had expected business investment fall 0.1 per cent from January-March period of last year.

The Bank of England and the International Monetary Fund have said there have been signs that uncertainty around the June 23 vote has weighed on investment. The BOE has also said commercial property transactions fell 40 per cent in the first quarter of this year.

Earlier this month, the heads of 15 major international companies who are major investors in Britain, including GE, Cisco, Mars and Airbus, called for Britain to remain in the EU and future investment decisions could be affected by a decision to leave the bloc's single market.

The BOE cut its economic growth forecast for this year in May to 2 per cent from 2.2 per cent and it stepped up its warnings on the economic risks of Britain leaving the Union.

The economy grew 2.3 per cent in 2015, the ONS said.

BOE governor Mark Carney has said a vote in favour of an exit from the EU could cause a short recession.

Household spending rose by 0.7 per cent in the first quarter, picking up a bit of speed from late last year.

Consumer spending has been the main driver of Britain's recovery from the financial crisis and policymakers have said they want to see greater investment by businesses to secure a more balanced economy.

REUTERS