UK GDP growth held back by soft trade and Brexit fears

Added 26th May 2016

The United Kingdom’s gross domestic product growth for the first quarter of this year was confirmed as 0.4% this morning by the Office for National Statistics.

UK GDP growth held back by soft trade and Brexit fears

According to economics consultancy Fathom Consulting a breakdown of the figures revealed that net trade was a “significant drag” on the British economy for the third quarter in a row.

“Private-sector investment intentions fell following the announcement of the referendum, and we had expected to see some reduction in private-sector investment in due course,” Fathom said. “However, the 2.0% fall in 2015 Q4 was driven largely by the disposal of transport assets. It had little to do with Brexit fears.”

“Unrevised from the first preliminary reading, UK GDP data prints at 0.4% for the first quarter with the annualised reading coming in at 2%, missing consensus estimates,” said Tom Floyd, a trader at Foenix Partners. “The weaker annual print evidences further confirmation of the Brexit related negativity already embedded in the wider economy and aside from recent retail sales, continues a poor run of UK economic indicators.

“David Cameron et al have largely based their campaign around the negative effects of leaving the union and the figures could be seen as some vindication of that stance, strengthening their argument and consolidating their already strong lead in the polls Floyd continued. “We could well be entering a brief period where bad data equals good news for sterling investors.”

“The downward revision of GDP to 2% suggests that perhaps the recovery we have been looking for after 18 months of slowing growth just isn’t there,” added Joshua Mahony, a market analyst at IG. “Perhaps the most telling figure today was the Q1 business investment reading, which contracted for the second consecutive quarter. This is a clear indication of the fear that firms are experiencing regarding the effects of a Brexit and makes you wonder what this number would look like in the event the UK left the EU.”

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About Author

Alex Sebastian

News editor

Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.



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