New year reveals UK showing signs of Brexit strain

7 January, 2019 12:00 AM printer

LONDON: The first week of the new year brought a slew of bleak reports for the UK economy, highlighting the scale of the challenges to come as Britain prepares to leave the European Union.

Data Friday showed the housing market had its worst 12 months since 2013 last year, consumers remained reticent about borrowing and a gauge of services, the largest part of the economy, stayed sluggish. The latter report, combined with measures of construction and manufacturing, indicates growth may have slowed to 0.1 per cent in the final quarter of last year, according to IHS Markit, report agencies.

“The economy effectively has ground to a halt, primarily due to mounting concerns about Brexit,” said Samuel Tombs, an economist at Pantheon Macroeconomics. “Recent indicators point to softness in retail spending. What’s more, the official data have begun to mirror the weakness of the PMIs.” He predicts growth slowed to just 0.2 per cent in the fourth quarter.

Fears the nation may crash out of the EU without a deal are increasing as Parliament prepares to vote on Prime Minister Theresa May’s widely opposed Brexit deal in less than two weeks, according to Bloomberg.

With Britain due to leave the EU on March 29, with or without an agreement, Mrs May is running out of time to resolve the divisions in her Conservative Party. The government has stepped up its planning for a no-deal exit, while Markit said manufacturers are aggressively stockpiling as they brace for a potentially disruptive departure.

The pound largely held its ground above $1.26 over the Christmas period, apart from a “flash-crash” dip to a 20-month low driven by the yen on Thursday, Reuters said. Following market turbulence earlier in December when opposition to the withdrawal agreement led to ministerial resignations and a failed leadership challenge against May, any signals of support could allow for some recovery in sterling, said Thu Lan Nguyen, strategist at Commerzbank.