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Thursday, February 2, 2023

UK economy stagnates in British election months

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The UK economy flatlined in the last three months of the financial year in line with expectations, as the country went to the polls, official figures have shown.

Gross domestic product (GDP) did not change at all in the last quarter, taking annual GDP growth to 1.4%, according to the UK’s Office for National Statistics (ONS).

It marks a ramp-up in growth for the full year compared with 2018, when GDP grew by 1.3%. However, it is still one of the slowest rates of growth since the financial crisis gripped the global economy in 2008 and 2009.

There was a slight pick-up in December, as the economy grew by 0.3% in the month of the election itself.

The stagnation in the fourth quarter compares with a 0.5% rise in the period before.

Rob Kent-Smith, the ONS’s head of GDP, said: “There was no growth in the last quarter of 2019 as increases in the services and construction sectors were offset by another poor showing from manufacturing, particularly the motor industry.

“The underlying trade deficit widened, as exports of services fell, partially offset by a fall in import goods.”

The news sent the pound up by 0.2% against both the euro and the dollar.

The statisticians said GDP growth had been “particularly volatile” in 2019, partially because of the changing deadlines for the UK to leave the European Union.

Brexit was originally scheduled for March 2019, but was later delayed to October, and then again to January this year.

The ONS found evidence that there had been stockpiling in the run-up to the October Brexit date, but this was not as pronounced as the March deadline.

It is still too early to tell if Britons were stockpiling in December to prepare for the final Brexit date in January 2020.

Household expenditure grew by 0.1% on the quarter before, the weakest figure since the fourth quarter of 2015, when spending dropped by 0.3%.

The Brexit date switched several times in 2019, putting pressure on the economy

Meanwhile, the services sector, which provides many jobs in the UK, slowed to 0.1% growth. This was in line with expectations and an easing since strong growth in the middle of 2018.

Manufacturing output declined sharply by 0.8% in the fourth quarter as there was less demand for cars. Many car producers decided to shut down their factories for shorter periods earlier in the year.

The Society of Motor Manufacturers and Traders (SMMT) recently released data showing a 6.4% decline in car production in the final quarter of 2019, and a 14.2% drop across the year as a whole.

Construction output grew by 0.5% in the last quarter of 2019.

British Chancellor Sajid Javid said: “We’ve broken the deadlock and left the EU – now we need to seize this moment to level up and prepare our great nation for long-term success.

“In my Budget, exactly one month from today, I’ll set out how we will move forward, with more ambition and new thinking, and empower our people and businesses so everyone has the opportunity to thrive.”

Shadow chancellor John McDonnell said: “These are damning figures showing an economy punctured by a decade of decline.

“With production tumbling over 2019 at its worst rate since 2012, it is clear that the Tories’ combination of cruel cuts and economic mismanagement has sent the economy into freefall.

“The Tories lack any vision or plan for the economy, and the upcoming Budget risks another decade of disappointment.”

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