Brexit Uncertainty Put Damper on U.K Economy Last Year
11 Février 2019 - 11:39AM
Dow Jones News
By Paul Hannon
The U.K. economy slowed in 2018 as businesses slashed investment
in the face of growing uncertainty about the way in which the
country will leave the European Union.
The U.K. is scheduled to leave the bloc on March 29, but it is
still unclear whether it will have a transition period that
maintains the status quo while a new trade agreement is negotiated,
or will immediately shift to a new regime of tariffs dictated by
World Trade Organization rules.
In the latter case, the Bank of England has warned the economy
could fall into recession. Even if there is a transition period,
uncertainty about the future relationship is likely to persist as
trade talks progress, potentially holding back growth into
2020.
The Office for National Statistics said Monday that the U.K.'s
gross domestic product--the broadest measure of goods and services
produced in the economy--was 1.4% higher in 2018 than in 2017, the
weakest expansion since 2012. The economy slowed more sharply as
the year drew to a close, with GDP rising at an annualized pace of
0.7% in the three months through December, down from 2.5% in the
third quarter. In December alone, GDP fell by 0.4% from
November.
Falling investment was largely responsible for the 2018
slowdown, and was down 0.9% from the previous year. This was the
largest drop since 2009, when the U.K. economy was caught up in the
global recession that accompanied a major financial crisis.
Automobile makers have been hobbled by a lack of clarity on
future trade rules, since they need to import parts from around the
EU, as well as sell some of their finished product to customers in
the bloc.
"Brexit uncertainty has already done enormous damage to output,
investment and jobs," said Mike Hawes, chief executive of the
Society of Motor Manufacturers and Traders.
Mr. Hawes's organization estimates that overseas investment in
the British automobile industry almost halved in 2018 to GBP588.6
million ($761.8 billion).
U.K. policy makers had hoped that growth would be boosted by
higher exports, reflecting the pound's weakening against other
currencies since the Brexit vote. However, the country's total
deficit in its trade in goods and services widened in 2018 by
GBP8.4 billion.
Some businesses have been preparing for the possibility of a
no-transition Brexit ever since the 2016 vote. Many more firms have
followed their lead in recent months, particularly since it became
clear that the withdrawal agreement negotiated by Prime Minister
Theresa May would struggle to find support from lawmakers.
A Bank of England survey of more than 200 firms carried out
between mid-December and late January found that half had
implemented their no-transition contingency plans. While those
plans vary, some involve stockpiling raw materials and other inputs
to guard against interruptions to imports.
However, the ONS said stockpiling doesn't appear to have been as
widespread as some surveys have suggested, and had little impact on
growth during the final months of 2018. Indeed, manufacturing
output was 0.7% lower in December than in November, and 2.1% down
on the same month a year earlier.
The U.K.'s slowdown adds to the headwinds facing the global
economy and is in keeping with developments elsewhere in Europe.
The German and French economies also slowed in 2018, each growing
by just 1.5%. In a report released last week, the European Union
warned that a no-transition departure by the U.K. in March could
further slow growth in the economies it leaves behind.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
February 11, 2019 05:24 ET (10:24 GMT)
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