UK economic growth collapses to five-year low

The UK economy almost stalled in the first quarter of this year growing by just 0.1 per cent, the Office for National Statistics reported.

This was down from the 0.4 per cent expansion registered in the final quarter of 2017 and well below the 0.3 per cent City analysts had expected.

It was also the weakest quarterly growth rate since 2012, while GDP per head fell by 0.1 per cent.

Economists said that the Beast from the East was partially responsible for the disappointing figures but also identified underlying signs of weakness among households, stemming from the squeeze on incomes due to the slump in sterling in 2016 and also trepidation from businesses ahead of Brexit next year.

Slumping in the wake of the data, the pound dropped to $1.3819, down 0.7 per cent on the day, as traders scrambled to bet against a May interest rate rise from the Bank of England due to the unexpected weakness of GDP.

The Bank had pencilled in a 0.3 per cent GDP expansion for Q1 in its most recent Inflation Report in February.

“The downside surprise in Q1’s GDP figures is probably the final nail in the coffin for the chance of an interest rate hike in May,” said Mark Hollingsworth of Capital Economics.

The UK was hit by severe bad weather in February and March. The ONS said that snow disruption had hit retail sales and construction, but could not explain all the fall in growth.

TNT Business

Photo Credit: Robert Rimmell

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