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UK Economy Slows Sharply on Brexit, Global Growth Concerns

The UK economy expanded at its slowest since 2012 late last year, as concerns over Brexit strain business investments and slowing world economic growth took a toll on the country’s trade sector.

The Office for National Statistics (ONS) reported on Monday that the quarterly rate of growth slowed to 0.2 percent between October and December from 0.6 percent in the previous quarter, while output last month alone fell by the most since 2016.

Figure was lower than the expected 0.3 percent and slightly weaker than the Bank of England’s forecast last week.

The British economy lost its summer exuberance in the final months of 2018, and there are signs of further chill winds ahead, according to Economist Tej Parikh.

The sterling stumbled to the lows of the day after the data release, with the GBP/USD falling 0.5 percent to $1.2875.

Overall, the country’s 2018 economic growth declined to its lowest in six years by 1.4 percent, ending below the 1.8 percent growth booked in 2017.

Brexit Uncertainty, Global Concerns Weigh on Trade

Exports took a hit from global weakness and rising worries about the lack of a deal for when Britain is set to depart from the European Union (EU) on March 29.

So far, UK Prime Minister Theresa May has been unable to gain the parliament’s support for the plan she agreed with Germany to avoid reemploying checks on products exported from Britain.

Major economies around the globe also lost momentum in 2018, partly due to the ongoing trade conflict between the US and China, while Brexit is another hurdle for Britain to overcome.

Last week, the Bank of England (BoE) slashed its forecast for growth this year to 1.2 percent, its weakest since the 2009 recession.

Monday’s figures showed net trade shed more than 0.1 percentage points from the fourth-quarter expansion rate. Plummeting investment by companies made a similar impact.

Statistician Rob Kent-Smith said gross domestic product (GDP) slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining.

The economy shrunk by 0.4 percent in December alone, the largest drop since March 2016.

The data showed the economy remained fundamentally strong and public-sector forecasters did not expect a recession, Finance Minister Philip Hammond stated.

Business investment was down 3.7 percent in the fourth quarter compared with the prior year, the biggest decline since the first three months of 2010, when the UK was recovering from recession.

Investment has faltered for four straight quarters now, the longest since the third quarter of 2009.

Household expenditure, which surprisingly bolstered growth in mid-2018, remained strong as it climbed 1.9 percent on a year earlier, while government spending was also the same.

For investment by firms as a whole, growth has decelerated since June 2016’s referendum, which the BoE cited as reason for the setback in economic productivity. The central bank sees lower business and housing investment this year, while it expects export growth to halve.

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Monday, 11 Feb, 2019 / 2:37

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