FILE PHOTO: Shoppers bid for cuts of meat during a Christmas Eve auction in Smithfield market in London, Britain December 24, 2018. REUTERS/Hannah McKay
January 13, 2020
LONDON, Jan 13 (Reuters) – Britain’s economy grew at its weakest annual pace in more than seven years in November, after output fell sharply that month, though a stronger performance in previous months brightened the picture slightly.
Political uncertainty hung over British businesses and consumers in late 2019, when the country had been due to leave the European Union on Oct. 31 until parliament forced a delay and Prime Minister Boris Johnson called an early election.
Monday’s official figures showed the economy in November was just 0.6% larger than a year before, the weakest expansion since June 2012, down from annual growth of 1.0% in October, which represented an upward revision from previously reported data.
Output in November alone shrank by 0.3%, the biggest drop since April, when businesses ran down stocks of goods built up in anticipation of a disruptive no-deal Brexit at the end of March, the Office for National Statistics said. Economists polled by Reuters had expected a flat reading for the month.
Looking at the three months to November, which smooths out some volatility, the economy grew by 0.1% versus poll forecasts for a 0.1% fall, reflecting unexpected upward revisions to output in October and September, which the ONS said reflected late survey returns.
“Overall, the economy grew slightly in the latest 3 months, with growth in construction pulled back by weakening services and another lacklustre performance from manufacturing,” ONS statistician Rob Kent-Smith said.
The period covered both the politically turbulent run-up to an Oct. 31 Brexit deadline, which parliament forced Prime Minister Boris Johnson to defer, and the start of an election campaign, when Johnson chose to put his Brexit plans to the public rather than seek support from opposition legislators.
He won an unexpectedly large majority in the Dec. 12 vote and private-sector business surveys since then have pointed to a recovery in sentiment at the tail end of 2019 and the very start of 2020.
The new parliament has approved Johnson’s plans to take Britain out of the European Union on Jan. 31, which will start the clock on an 11-month transition period during which Johnson wants to negotiate a long-term trade deal with the EU.
European Commission President Ursula von der Leyen called this timescale “basically impossible” when she met Johnson last week, and with Johnson ruling out an extension to the transition period, some businesses fear they could face tariffs and other obstacles to trade with the EU from 2021.
The Bank of England predicted in November that the economy would eke out very limited quarterly growth in the fourth quarter, before recovering in 2020. This forecast assumes progress toward a trade deal and a reduction in U.S.-China trade tensions.
In the past week BoE Governor Mark Carney – who steps down in March – and two other rate-setters, Silvana Tenreyro and Gertjan Vlieghe, said a rate cut could be needed if these assumptions prove over-optimistic.
Two more policymakers, Michael Saunders and Jonathan Haskel, already support a rate cut.
(Reporting by David Milliken and Andy Bruce)
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