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UK slowdown confirmed as economists fear longer-term slump

Tim Wallace
The Beast from the East helped push the UK economy off track in the first three months of 2018 - but the ONS says snow was only a small part of the damage, while the Bank of England thinks the weather was a more serious problem - PA

Almost all parts of Britain’s economy slowed down in the first three months of the year, official figures have confirmed, with investment falling and exports failing to give growth a much-needed boost.

Only part of the slump is weather-related, the Office for National Statistics (ONS) said, raising fears that there could be an underling slowdown in the economy.

GDP increased by 0.1pc in the first three months of the year, officials confirmed in their second estimate of the data, down from 0.4pc in the final quarter of 2017 and the slowest pace since 2012.

GDP per person did not grow in the quarter.

“Taking together the forces of Brexit uncertainty, softening indicators in overseas markets and consumers that have yet to regain their mojo, it is hard to see what will spur some renewed momentum in the economy over the next couple of quarters,” said Lee Hopley, chief economist at manufacturing industry group EEF.

Construction output dived 2.7pc, though this is less extreme than the 3.3pc drop estimated initially.

Household spending growth slowed to 0.2pc in the quarter, adding to the retail sector’s woes.

Business investment fell 0.2pc. Both exports and imports fell with the result that net trade added nothing to GDP in the quarter.

The services industry, which makes up a dominant share of the economy, expanded by 0.3pc.

Business services and finance led the way at 0.4pc, a rate matched by transport, storage and communications.

But the distribution, hotels and restaurants sector was hit by the bad weather and contracted by 0.1pc.

An anticipated rebound in oil and gas production was underwhelming. Its industrial category, mining and quarrying, grew by 2.2pc, revised down from an earlier estimate of 3.5pc.

“While the bad weather had some impact on the economy, particularly in construction and some areas of retail, its overall effect was limited, with partially offsetting impacts in energy supply and online sales,” the ONS said.

However, Bank of England Governor Mark Carney said he believes the economy is stronger than the official numbers suggest, arguing the ONS’s measures of the impact of the weather are less reliable than the Bank’s.

As a result he thinks the weather had a more significant effect and so the economy has more underlying strength.

The Bank of England believes that further revisions will show GDP grew by 0.3pc in the first quarter.

Economic slump was just a blip, probably

Economists anticipate a modest recovery in the rest of the year.

“The figures confirm the view that UK growth was subdued in the first quarter, though we continue to believe that this overstates the underlying weakness of the economy, bearing in mind the strong jobs growth we've seen,” said John Hawksworth at PwC.

“We expect some recovery in the second quarter, with GDP growth of around 1.3pc for 2018 as a whole."