UK economy stalls despite strong January

Shoppers on Oxford StreetImage copyright Getty Images

The UK economy grew by 0.2% in the three months to January, matching the growth of the previous three months.

The report from the Office for National Statistics (ONS) showed a pick-up in activity in January when the economy expanded by 0.5%.

The ONS said strength in IT, health services and wholesale trading offset falls in the manufacturing of metals and cars, and construction repair work.

The increase in wholesale could indicate stockpiling ahead of Brexit.

However, the ONS was unable to comment on whether the rise was linked to UK manufacturers stockpiling.

The services sector, which accounts for about 80% of the private sector economy, grew by 0.3% in January after a 0.2% fall in December.

The rolling three-month growth in the services sector was 0.5%, mainly driven by wholesale and retail trade.

Construction, which accounts for about 6% of the economy, reversed its fall in December to grow by 2.8% in January.


Analysis: By Dharshini David, economics correspondent

The uncomfortable truth is that the economy has lost speed.

Growth of 0.2% across three months is a fraction of what the UK typically achieves.

Brexit uncertainty appears to have hammered business investment, while growth in the Eurozone has fallen way short of expectations.

Although the economy expanded by 0.5% in January alone, even the number crunchers who calculate these monthly estimates admit that they’re volatile and need cautious treatment.

And January’s rebound was driven by manufacturing and construction.

But surveys suggest recent industrial activity has been driven by speeding up production of finished goods ahead of Brexit rather than new orders; though the ONS numbers don’t distinguish between these.

And the rebound follows very weak months for manufacturing and construction – output across the last three months in both was flat.

Total growth across the last three months was driven by services – in particular the wholesale retailing, again hinting at stockbuilding.

The “fog of Brexit” may have actually inflated activity of late.

Beyond that, growth is at best sluggish.


Yael Selfin, chief economist at KPMG said the figures confirmed growth momentum in the UK economy had “stalled”.

“The first glimpse of GDP data for this year points to a UK economy hovering well below its growth potential, as we wait for the Brexit fog to dissipate.

Ms Selfin said she expected growth to “remain subdued in the short-term”.

However, Andrew Wishart, UK economist with Capital Economics, said the numbers provided some reassurance that the UK economy is weathering a political crisis at home and a slowdown overseas “pretty well”.

He said there was “little evidence” of stockbuilding, with output in the transport and storage sector falling in January and the three-month growth in imports easing off.

“Of course, the data may deteriorate in February and March if Brexit has caused consumers and firms to reach for the handbrake,” he added.

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