The UK economy grew at a slower pace than previously thought at the end of 2017, as production industries dragged growth back.
The Office for National Statistics today said GDP rose by only 0.4 per cent in the fourth quarter of 2017, 0.1 percentage points down from its first estimate.
The growth downgrade means the UK economy grew by only 1.7 per cent in 2017, lower than thought at first with a slower first quarter than earlier estimates. That meant a bigger slowdown from the 1.9 per cent expansion seen in 2016, and the slowest since 2012.
Business investment growth was flat in the fourth quarter, although it rose by 2.1 per cent over the year.
However, financial and business services provided a rare bright spot, with growth in the sector, which covers much of the City, revised upwards from 0.8 per cent to 0.9 per cent.
The figures show the importance of preserving the City’s trade access to the EU after Brexit, according to Stephen Jones, chief executive of the UK Finance lobby group.
“This is a timely reminder of the importance of financial services in talks over a future EU-UK agreement,” he said. “An ambitious free trade deal, underpinned by the mutual recognition of closely aligned standards, will help drive jobs and growth both in the UK and across the continent.”
The figures may inject some uncertainty into the Bank of England‘s interest rate plans, although monetary policymakers have previously emphasised that wage growth will be a key metric, given a lower “speed limit” for the UK economy.
“This is not an economy that needs cooling with higher rates,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics, with the Bank of England widely expected to increase interest rates in May.
While the economy “still appears to have gathered a little momentum in the second half of last year”, data suggest the economy “remains in a fragile state”, Tombs said.
GDP per head, which strips out the effects of a rising population, grew by 0.2 per cent in the fourth quarter, meaning it is only three per cent above the peak hit before the financial crisis.
The figures give further evidence of the overwhelming dependence of the UK economy on the services sector, which accounted for 1.3 percentage points of 2017 growth – although that represented a steep fall from the two percentage point contribution to growth in 2016.
Production industries, which include the manufacturing sector, contributed only 0.3 percentage points, in spite of manufacturers enjoying a “sweet spot” thanks to the 2016 devaluation of sterling.
The figures also show output from the agriculture industry did not grow at all for the second year in a row.
Source: City A.M.