UK economy grows at slowest pace in the last five years

The UK economy has grew at its slowest pace in the past five years for the first quarter of 2018.

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.1% in its initial estimate for January to March.

This marked the weakest quarterly growth since the fourth quarter of 2012.

This has prompted disappointment from the UK government who said that the GDP figures were “disappointing”.

Many have speculated that Brexit could be a factor, while some have also pointed to the “Beast from the East”, with freezing conditions in February leading to a dent on Britain’s economy.

However, official figures showed that recent snowfalls had a relatively small effect on growth.

ONS spokesman Rob Kent-Smith said in a statement: “Our initial estimate shows the UK economy growing at its slowest pace in more than five years, with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly.

“While the snow had some impact on the economy, particularly in construction and some areas of retail, its overall effect was limited, with the bad weather actually boosting energy supplies and online sales.”

Analysis: Ben Brettell, Senior Economist, Hargreaves Lansdown

After last week’s retail sales data highlighted the damaging impact of March’s cold snap, a disappointing first-quarter GDP number today was pretty much nailed-on. Economists had pencilled in a mild slowdown, to 0.3% growth in the quarter.

But what materialised was worse than feared, with the economy trudging through the snow to post growth of just 0.1%. This is the slowest pace of growth since the final quarter of 2012.

The question now is whether the slowdown can be fully attributed to the Beast from the East, or whether there are more worrying factors at play. The ONS said that while the weather had some impact on the economy, especially in construction and retail, this was offset by boosts to energy supplies and online sales, meaning the overall effect was limited.

The news casts further doubt over a May interest rate rise. As recently as last week markets were pricing in a near 90% chance that the Bank of England would raise rates next month, but this fell to more like 50% after comments from Mark Carney suggested potential ‘softer’ economic data and continued uncertainty over Brexit meant policymakers weren’t wedded to a May hike. Today the market’s saying there’s just a 25% chance that rates will move in May.

Unsurprisingly sterling fell sharply on the news, losing around three-quarters of a cent against the dollar and half a cent against the euro as traders hastily revised their interest rate expectations.