The UK Economy Stalls, Brexit Vote Looms
The UK economy has slowed noticeably as the country moves toward the European Union (EU) membership referendum on 23 June.
The uncertainty that shrouds the outcome is tolling on the economy. The rate of growth fell Q-1 of this year to 0.4 from 0.6% in Q-4 of Y 2015, according to statistics released on Thursday.
Disappointing numbers in business investment and trade, 2 sectors that stand to suffer the most in case of a Brexit meaning exit from the EU, were the major factor behind the setback.
The latest figures from the Office of National Statistics (ONS) showed that business investment fell by 0.5 inQ-1, and experts put this down to the referendum effect.
UK’s Q-1 growth was solely driven by consumers, whose spending rose 0.7% Q-Q.
The British recovery is unbalanced, particularly in light of the 4th Q running of negative figures in trade balance, reflecting continued weakness in the country’s largest trading partner, the EU.
The revised figures released by the ONS showed that in March alone output from the construction sector and from the dominant services sector, by itself representing more than 75% of the economy, had their biggest monthly decliner since December 2012.
This augurs badly for growth in Q-2 of this year, as the softness of recent surveys points to potential for an even weaker outturn.
But the end of Q-2 also marks the vote on the referendum, if the result is to remain in the EU, experts predict a economic rebound.
An economist with the HSBC, said: “The fact that the slowdown is driven by investment and net exports supports our view that there should be a bounce in 2-H, assuming a pro-EU vote in June.”
Have a terrific Memorial Day weekend.