Manufacturing slump puts UK economy into reverse as Brexit looms


The British economy plunged into reverse in December as Brexit draws nearer, with a broad-based slump in economic output completing the weakest year for growth since 2012.

The Office for National Statistics said gross domestic product contracted by 0.4% in December from the previous month, fuelled by a fall in spending on the high street over the key festive shopping period.

The decline in monthly output helped drag down quarter-on-quarter growth to a rate of 0.2% in the three months to December, slightly below the expectations of the Bank of England and down from a rate of 0.6% in the third quarter.

Economists tend to focus on the three-month figures, as monthly GDP snapshots can be prone to revision, but the scale of the decline in December is likely to be seen as a sign of the economy losing momentum as Brexit draws nearer.

For 2018 as a whole, GDP growth slipped to its lowest since 2012, at 1.4%, down from 1.8% in 2017.

Despite the broad-based slowdown, Philip Hammond, the chancellor, said the latest figures showed that Britain’s economy remained fundamentally strong.

“The UK is currently enjoying the longest unbroken quarterly growth streak of any G7 nation,” he said.

However, the latest monthly figures revealed that manufacturing output tumbled into recession territory with the sixth consecutive month of falling output. This marked the longest negative run since September 2008 to February 2009, the depths of the financial crisis.

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Manufacturing of cars and steel products dropped. Exports suffered from weak global demand, while domestic activity was constrained by the political impasse over Brexit in Westminster.

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The figures revealed that business investment fell for the fourth quarter in a row – in a first since the last recession in 2009 – as the lack of clarity over Britain’s future trading relationship with the EU led companies to pause their investment plans.

Yael Selfin, the chief economist at the accountancy firm KPMG, said: “It is particularly worrying to see business investment contracting significantly again, as it will impact the UK’s longer-term productive capacity as well as productivity performance, and points at a low vote of confidence from business in the UK’s future.”



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