LONDON (Reuters) – British firms minimize their funding within the second quarter of 2018, when Brexit was lower than a yr away, and the nation’s stability of funds shortfall grew greater than anticipated, official information confirmed.
People stroll by the River Thames throughout from the monetary district of London, Britain, September 23, 2018. REUTERS/Henry Nicholls
The Office for National Statistics confirmed a earlier estimate that Britain’s total financial system grew by a quarterly zero.four % within the April-June interval.
But it lowered the annual progress charge within the second quarter to 1.2 % from a earlier estimate of 1.three %.
It additionally minimize the quarterly progress charge within the first three months of the yr, when the nation was hit by heavy snow, to zero.1 % from zero.2 %.
Economic progress within the first half of 2018 was the weakest for a six-month interval because the second half of 2011, the ONS stated on Friday.
Sterling fell after the information and briefly touched its lowest stage in practically two weeks in opposition to the U.S. greenback.
“Although it has picked up a little from a slow start to the year, underlying economic growth remains persistently below the long-term average,” ONS statistician Rob Kent-Smith stated.
The ONS has already revealed its estimate for GDP progress for the three months to July, which confirmed the financial system working at its quickest tempo in practically a yr, helped by sizzling summer season climate and the World Cup, which inspired customers to spend.
Ruth Gregory, an economist at Capital Economics, stated the weak image of the financial system within the first half of the yr, mixed with the uncertainty about Brexit, meant the Bank of England was unlikely to lift rates of interest once more till May, after Britain’s scheduled departure from the EU.
The revised figures revealed on Friday advised firms had been taking a cautious strategy earlier than Brexit.
Business funding fell zero.7 % within the second quarter in contrast with the primary — a pointy discount from a earlier estimate that funding grew by zero.5 % — and was down for the second quarter in a row.
“Investment is being tightly controlled with spend directed to keeping things going but not to expansion. UK is going to lose out on future growth,” Mark Gregory, chief economist at accountants EY, stated on Twitter.
The ONS stated the autumn was pushed largely by decreased funding in equipment and buildings.
In annual phrases, business funding was additionally down, falling zero.2 % for the primary decline in a yr and a half.
The Bank of England has beforehand stated business funding in Britain needs to be rising strongly with the world financial system increasing rapidly, and it hyperlinks the weak point to Brexit uncertainty.
A survey revealed earlier on Friday stated one in 5 British firms would transfer not less than a few of their operations to the European Union within the event of a no-deal Brexit.
The ONS additionally stated Britain’s stability of funds shortfall received greater, hit by the nation’s wider commerce deficit.
The distinction between cash flowing in and overseas was adverse by 20.three billion kilos ($26.5 billion) from April to June, greater than a deficit of 15.7 billion kilos within the first quarter, the ONS stated.
The shortfall was additionally greater than a median forecast of 19.four billion kilos in a Reuters ballot of economists.
As a share of GDP, the deficit rose to three.9 %, up from three.zero % within the first quarter and was the most important in a yr.
Bank of England Governor Mark Carney has warned that Britain’s massive present account deficit left it reliant on “the kindness of strangers”.
That could possibly be a threat because the nation prepares to depart the EU in March with no readability but on whether or not it is going to clean its exit with a transition interval.
Writing by William Schomberg, enhancing by Larry King