You are here
UK growth slowdown to put economy back in election spotlight
[LONDON] Britain's economy slowed in the first three months of this year, data is likely to show on Tuesday, potentially dealing a setback to Prime Minister David Cameron who has staked his re-election bid on the strength of the recovery.
Quarterly growth eased to 0.5 per cent, according to the median forecast in a Reuters poll of economists, down only a touch from 0.6 per cent in the last three months of 2014 but its slowest pace in more than a year.
Several forecasters with leading banks predict a sharper slowdown, possibly to as little as 0.3 per cent.
The preliminary reading of GDP, due at 0830 GMT, is largely an estimate by official statisticians because more half of the data has yet to be gathered, and the figures are often revised.
But coming just days before the May 7 national election, a first-quarter slowdown would be seized upon by the opposition Labour Party which is running neck-and-neck with Mr Cameron's Conservatives in opinion polls.
The Conservatives' campaign message has been dominated by references to their "long-term economic plan" and how Britain last year grew faster than other rich nations.
Labour has focused on what it calls Britain's cost-of-living crisis after earnings lagged behind inflation throughout most of the five years since Mr Cameron become prime minister.
Adam Ludlow, a senior consultant with polling firm ComRes, said a very weak reading would raise questions about the core message of the Conservatives.
He said a bad set of balance of payments announced just before an election in 1970 was seen as a big factor in the shock defeat of Labour's prime minister at the time, Harold Wilson. "However, it could also raise the importance of the economy in voters' minds, above other things like the health service, and that could play into the Conservatives' hands," Mr Ludlow said.
In annual terms, Tuesday's data was expected to show the economy was 2.6 per cent bigger than in the first quarter of last year, slowing from 3.0 per cent in the fourth quarter.
The economy is not expected to lose much momentum in 2015 as a whole, unless the election results in a weak government that might limp on for a few months before another vote.
Private sector surveys have shown companies remain upbeat about demand, especially as the euro zone show signs of growth.
The weak first-quarter growth rate is unlikely to change the thinking much at the Bank of England which has kept interest rates unchanged at 0.5 per cent for more than six years.
Minutes of its latest monetary policy meeting showed the Bank's interest rate-setters were optimistic about the prospects for the euro zone and there were no calls for a rate cut.