In Brief

UK economy stagnated in final quarter of 2019

Speculation of a rise in interest rates after disappointing report from ONS

Political uncertainty and anxiety over Brexit worries have been blamed as Britain’s economy stagnated in the final quarter of 2019.

The Office for National Statistics reported yesterday that GDP flatlined in the October-December quarter.

The ONS’s head of GDP, Rob Kent-Smith, explained: “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.”

A slowing eurozone and trade tensions are also being blamed for the stunted growth. In response to the news, the chancellor, Sajid Javid, promised brave measures in March’s budget, while the shadow chancellor blamed government failure.

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

But while the economy shrank by 0.3% in November, it bounced back with 0.3% growth in December. In January service sector companies – regarded as the cornerstone of the economy – recorded the strongest upturn in activity since mid-2018.

The Guardian said “there are signs that resolving the impasse over the first stage of Brexit, which resulted in Britain leaving the EU on 31 January, has brought a rebound in business activity since the start of the year”.

Ruth Gregory, senior UK economist at Capital Economics, told the BBC that the flat growth seen at the end of the year would “prove to be a low point”.

She added: “The pick-up in the surveys of activity and sentiment suggest the first quarter will be much better.

“The GDP figures were not quite as bad as we had feared in quarter four. The stagnation in GDP beat our forecast of a 0.1% quarter-on-quarter fall.”

Tej Parikh, chief economist at the Institute of Directors, said: “Firms entered 2020 with more of a spring in their step. Confidence has shot up, while hiring plans and investment intentions have also risen a notch, but the post-election bounce may tail off."

The news has also prompted speculation that interest rates could be cut as soon as next month to promote growth.

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