Subscribe
Sponsored by:
Sunbury Area Weather Sponsored by Sunbury Community Hospital
subscription services
Feb 22, 12:02 PM EST

The Brexit effect: UK economy grows at 5-year low in 2017


AP Photo
AP Photo/Matt Dunham

Photo Gallery
Animal census at the London Zoo
Latest News from Britain
Red Cross: 21 resigned or fired since 2015 in sex cases

Brexit is already causing a drop in EU migration to UK

UK taxpayer-owned RBS reports first profit in a decade

UK police probe 'racist' package sent to Harry and Meghan

UNICEF official resigns after allegations made

Online dating couple jailed in UK for IS-inspired bomb plot

Multimedia
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
Italian campaign promises gloss over grim economic realities

Germany books record surplus as economy keeps growing

The Brexit effect: UK economy grows at 5-year low in 2017

European Central Bank hints at revising stimulus outlook

German business confidence drops amid global, local concerns

White House says US could reach 3 percent growth rate

Bank of England's Carney predicts UK living standards boost

Eurozone economy cools amid stock market turmoil

Greece: Fitch upgrades country's sovereign rating

US inflation pressures raising expectations for rate hikes

Interactives
Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

LONDON (AP) -- The British economy grew at its slowest rate in five years during 2017 as consumers and businesses were held back by factors directly related to Brexit.

Armed with more information following an initial estimate, the Office for National Statistics said Thursday that the British economy expanded by only 0.4 percent in the October to December period, down from 0.5 percent before, largely because of lower than anticipated industrial production.

The downgrade reduced overall 2017 growth to 1.7 percent, its lowest since 2012, and confirmed that Britain is one of the slowest-growing Group of Seven economies. Before the June 2016 vote to leave the European Union, it had for years been one of the fastest-growing.

Though Brexit isn't officially due to take place until March 2019, the vote to leave the European Union has clearly hit consumers and businesses.

The former have been constrained by a sharp rise in inflation that was due to the fall in the pound following the referendum. The depreciation raised the cost of imported goods, notably food and energy. And the increase in inflation has eaten into wages, reducing purchasing power. Household spending grew by 1.8 percent in 2017, its lowest since 2012.

In a statement accompanying Thursday's downward revision, agency statistician Darren Morgan noted that a number of consumer-facing industries slowed "as price rises led to household budgets being squeezed."

That squeeze on household incomes is due to end this year, according to Bank of England Governor Mark Carney, as wage rises are forecast to start to outstrip inflation. Currently, wages are growing about 2.5 percent on average against price increases of about 3 percent.

But the softer growth is not just about consumers. Businesses, too, have taken a more cautious approach on investment as they seek clarity over the post-Brexit economic landscape. Business investment during the fourth quarter was flat when compared to the year before, a sign of the impact of Brexit uncertainty.

With little more than a year to go to Brexit, executives will be hoping for some clarity to emerge over the coming days. On Thursday, Prime Minister Theresa May is hosting some of her top minister at her country retreat in an attempt to forge a consensus over the way ahead.

"There is the potential for business investment to pick up significantly over 2018 and 2019 if the Brexit negotiations deliver further clarity to firms regarding the U.K.'s future economic position," said Pablo Shah, an economist at the Centre for Economics and Business Research.

Discussions over the trading relationship between the government and the EU are due to resume soon, and many businesses, particularly in the finance sector, are hoping that a transition deal will be agreed on shortly whereby Britain will remain in the tariff-free European single market and customs union for a period after Brexit.

Though the impact of the falling pound is set to diminish over the year, Brexit is still the biggest cloud over the economic horizon this year.

"The effect of the uncertainty around future trading relationships is having an impact on the demand side of the economy," Carney told lawmakers Wednesday. "I don't think that's controversial, it's pretty clear ... We have moved from the top of the pack to the bottom."

© 2018 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.

ADVERTISEMENT
FEATURED PROPERTIES
FEATURED JOBS
© 2006, CNHI

Community Newspaper Holdings, Inc.CNHI Classified Advertising NetworkCNHI News Service
Associated Press content © 2007. All rights reserved. AP content may not be published, broadcast, rewritten or redistributed.
Our site is powered by Zope and our Internet Yellow Pages site is powered by PremierGuide.
Some parts of our site may require you to download the Flash Player Plugin.