Osborne Set To Repeat EU Economy Argument

Chancellor George Osborne is set to repeat his argument that the EU referendum is already weighing down the UK economy.

The key measure of economic growth - the GDP figure for the first three months of this year - will be released later today.

It (Other OTC: ITGL - news) is expected to be markedly down from the last quarter of 2015.

A slowdown from the 0.6% growth registered in Q4 in 2015 has been anticipated by both the Bank of England and independent economists.

GDP growth is expected to have slipped to 0.4% in Q1 of 2016.

A number of factors have been outlined as causing the slowdown, from uncertainty around the referendum on 23 June to the global slowdown in the world economy and the headwind of further cuts and tax rises.

Mr Osborne will give his reaction to the figures when they are released this morning.

However, earlier this month the Chancellor told Sky News in Washington that he saw the impact of the referendum.

"I think it's fair to say that some of the concerns about potential exit are weighing on sentiment now and weighing on economic activity now," he said.

"That again is highlighted in the (Bank of England) MPC (KOSDAQ: 050540.KQ - news) minutes where they highlight deferred capital expenditure and commercial property investment as two specific examples.

"And that will impact on growth in the first half of this year - and could well be reflected on the GDP number which we see for Q1."

On 15 April, the Bank of England's key policy making committee did unanimously conclude that "there had been some signs that increased uncertainty might be beginning to weigh on demand.

"Business surveys had reported a softening in investment intentions, consistent with expenditure decisions being deferred pending the outcome of the referendum."

The Bank of England referred to a Deloitte survey of chief financial officers "reported the highest level of external financial and economic uncertainty for three years" and that "transactions in commercial real estate had fallen by around 40% in Q1, with referendum uncertainty reported to have played a significant role".

The Bank of England also highlighted reports that "some IPOs and private equity deals had been delayed" and anticipated that "the economy could slow somewhat in Q2".

At the Treasury Select Committee hearing last month on the Referendum, Bank of England Governor Mark Carney said that the Bank's own measures of financial market volatility and uncertainty had, since December, spiked up to levels that would impact on the real economy.

Those measures have moved higher in recent weeks.

The referendum will take place before the Q2 GDP figure.