Business

UK economy saw zero growth at the end of 2019

The UK economy saw no growth in the final three months of 2019, as manufacturing contracted for the third quarter in a row and the service sector slowed around the time of the election.

The Office for National Statistics (ONS) said the car industry had seen a particularly weak quarter.

The ONS figures also showed the economy grew by 1.4% in 2019, marginally higher than the 1.3% rate in 2018.

Recent surveys have suggested that the economy has picked up in the new year.

How worried should we be?
Ruth Gregory, senior UK economist at Capital Economics, suggested that the flat growth seen at the end of the year would “prove to be a low point”.

She added: “The pick-up in the surveys of activity and sentiment suggest the first quarter will be much better.

“The GDP figures were not quite as bad as we had feared in quarter four. The stagnation in GDP beat our forecast of a 0.1% quarter-on-quarter fall.”

In December alone the economy grew by 0.3%, the ONS said, reversing the decline seen previously in November.

“It’s likely that political uncertainty and unwinding stockpiles caused the economy to flag at the end of last year,” said Tej Parikh, chief economist at the Institute of Directors.

“However, firms entered 2020 with more of a spring in their step. Confidence has shot up, while hiring plans and investment intentions have also risen a notch, but the post-election bounce may tail off.”

Which sectors performed poorly?
Rob Kent-Smith, the ONS’s head of GDP, said: “There was no growth in the last quarter of 2019 as increases in the services and construction sectors were offset by another poor showing from manufacturing, particularly the motor industry.”

The services sector – which accounts for more than three-quarter of the UK economy – grew by just 0.1% in the final quarter of 2019, while the construction sector grew by 0.5%.

However, the manufacturing sector saw output fall by 1.1%. That came after some car factories paused work in November in case Britain left the European Union without a deal on 31 October.

The ONS revised up the growth figure for the third quarter of 2019 to 0.5% from its previous estimate of 0.4%.

What about trade?
The last three months of 2019 also saw the trade deficit in goods and services widen to £6.5bn from the £4bn deficit seen between July and September.

A deficit occurs when the value of a country’s imports in goods and services exceeds what it exports.

The deficit widened largely because of a shrinking of the surplus in UK trade in services.

By contrast, the goods trade deficit shrank in the last three months of 2019. That was mostly accounted for by a £2.2bn decrease in machinery and transport equipment imports, which could suggest that orders might have been brought forward to avoid the (postponed) October Brexit deadline.

For 2019 as a whole, the trade deficit for goods and services narrowed slightly by £0.5bn to £29.3bn.

Related Articles

Close