The UK economy grew at 1.4 per cent last year, its slowest annual rate since 2012, mainly due to a sharp slowdown in the final quarter, according to official data on Monday.

Fall in manufacturing and car production largely responsible for downturn

The Office for National Statistics (ONS) said falls in manufacturing, particularly car production, was largely responsible for the GDP downturn in Q4, including contraction during December. The economy grew by just 0.2 per cent in the final quarter, down from 0.6 per cent in Q3.Rob Kent-Smith, head of GDP data at the ONS, "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."However, services continued to grow with the health sector, management consultants and IT all doing well."

Falls in investment blamed on Brexit whilst sluggish growth mimics other EU economies

Although Brexit was deemed responsible for falls in business investment in the final nine months of 2018, the GDP figures had echoes in other major European economies. Italy’s economy shrank by 0.2 per cent in the final quarter, France expanded by 0.3 per cent and Germany, whose official figures will be published later this week, is forecast to show just 0.1 per cent growth in Q4.Chancellor of the Exchequer Philip Hammond commented, "The UK's economy continues to grow and remains fundamentally strong."Growth of 1.4 per cent in 2018 means the UK has grown every year for the past nine years and the OBR (Office for Budget Responsibility) expects it to continue growing in every year of the forecast."The UK is currently enjoying the longest unbroken quarterly growth streak of any G7 nation."

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Business leaders cautious about loss in momentum

However, business groups sounded a more cautious note. Tej Parikh, senior economist at the Institute of Directors, commented, “The UK economy lost its summer exuberance in the final months of 2018, and there are signs of further chill winds ahead.“The ongoing uncertainty around what happens after March 29 is the prime suspect behind sapped economic activity. There is currently a drag on growth as some businesses are forced to hold back on major investments and engage in cautionary stockpiling.“The first half of 2019 will bring further challenges for the UK economy. China’s slowdown and weak growth in Europe are likely to bite at British exporters. At the same time, while consumers have shown resilience so far, many are becoming increasingly cautious with their wallets.“The clock is ticking, but if a Brexit deal can be agreed, things should start to look sunnier as pent-up demand is released and firms begin investing again.”Suren Thiru, head of economics at the British Chambers of Commerce, added, “The latest data indicates that the UK economy suffered a significant loss of momentum in the final quarter of 2018, with Brexit uncertainty, a slowing global economy and the persistent financial squeeze on consumers and businesses increasingly having a suffocating effect on economic activity.

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Services sector drives growth whilst manufacturing and constuction slow

“The slowdown in the fourth quarter largely reflected weaker outturns from manufacturing and construction. In contrast, the services sector was the main driver of growth."The continued decline in business investment is a blackspot for the economy as it undermines the UK’s ability to raise productivity and increase our long-term growth prospects. The widening in the UK’s trade deficit is further evidence that slowing global growth and continued uncertainty over Brexit are making trading conditions for UK exporters more challenging.“It is increasingly likely that the slowdown at the end of 2018 will persist as continued Brexit uncertainty and the raised possibility of a no-deal exit from the EU weigh heavily on UK’s growth prospects. Firms are increasingly reporting having to divert staff, money and investment to protect against chaos of a no-deal Brexit.“It’s vital that government avoids a messy and disorderly Brexit on March 29 as it would be a significant negative shock to the UK economy, damaging communities across the country. These figures underline the importance of ministers standing ready to lift confidence and boost investment intentions.”Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online DirectorySubscribe to Relocate Extra, our monthly newsletter, to get all of the international assignments and global mobility news.

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