UK’s economy grows at it slowest pace for five years in first quarter of 2018

London tech

Britain’s economic growth was left unchanged at 0.1% in the first quarter, according to official figures.

The Bank of England (BoE) and the Treasury had expected the Office for National Statistics to revise the number higher with its second reading of the economy.

The Bank believes the unseasonal snowy weather in late February and early March did have an impact on the economy – but that’s not the view of the ONS, which said “its overall impact was limited”.

Household spending rose 0.2 per cent in the first three months of the year, its weakest growth in more than three years. Business investment dropped 0.2 per cent in the quarter.

ONS head of GDP Rob Kent-Smith said: “Overall, the economy performed poorly in the first quarter with manufacturing growth slowing and weak consumer-facing services.

“While there was some evidence of the poor weather hitting construction and high street shopping, this was offset to an extent by increased energy supply and online sales.”

It did revise its reading of construction output to a fall of 2.7 per cent, up from a decline of 3.3 per cent.

The services sector grew by 0.3 per cent in the first three months of the year. But from the same period a year ago, this part of the economy is weakening.

Howard Archer, chief economic adviser to the EY Item Club, said: “While growth in the first quarter was clearly savaged by the Beast from the East, the extent of the slowdown has fuelled strong suspicion that there was a significant underlying loss of momentum in economic activity in addition to the weather impact,” he said.

The latest growth reading may dampen hopes of an interest rate hike from the Bank of England in the coming months.

Ruth Gregory, UK economist at Capital Economics, said: “We still think that the figures are underestimating the true strength of the economy and will be revised up in time.

“Note that the Monetary Policy Committee (MPC) thinks that quarterly GDP growth was more like 0.3%.

“Meanwhile, we doubt that it will take too much to convince those MPC members – who are waiting for confirmation that the slow patch will prove transitory – to switch from the no-change to the rate-hike camp.

“There have already been promising signs that the consumer spending growth has regained some pace in April. If the firmer tone of the activity data continues, then we still think that a rate hike in August is more likely than not.”

Most economists had expected the ONS to keep the growth rate at 0.1 per cent, its the slowest pace in five years.