The numbers for 2018 GDP growth are in and, while they’re not great, they’re a lot better than some doom-mongers have expected.
UK annual GDP growth slowed to 1.4% in 2018, the lowest since 2012. Having said that growth was below 2% for the previous two years and historically we seem to have paid the price for few recessions by having smaller peaks too. This ONS chart shows around 2.5% is the long-term historical norm so we’re below par but not by a lot.
Further context can be provided by looking at the rest of Europe. A recently published European Commission report says German GDP grew by 1.5% last year, with the French managing exactly the same. In both cases, however, this was down from 2.2% last year and the UK is actually forecast to slightly out-perform Germany this year, with growth of 1.3%. The whole of the EU27 is only forecast to grow by 1.5% this year.
“GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining,” said Rob Kent-Smith, Head of GDP at the ONS. “However, services continued to grow with the health sector, management consultants and IT all doing well.
“Declines were seen across the economy in December, but single month data can be volatile meaning quarterly figures often give a better indication of the health of the economy. The UK’s trade deficit widened slightly in the last three months of the year, while business investment again declined, now for the fourth quarter in a row.”
The EC report defaulted to tried and tested ‘uncertainty’ to explain the slowdown. The main thing flagged up was the current aggro between the US and China, but also “…social tensions and fiscal policy uncertainty in some Member States,” which seems to be a reference to France and Italy, respectively. The uncertainty around Brexit was briefly mentioned at the end of the commentary.
That hasn’t stopped opponents of Brexit jumping on these figures as the next piece of news to support their apocalyptic narrative, with loads of supposed experts jumping on the bandwagon and claiming special insight into the minds of the country’s business people. Many such experts also predicted a recession in the event of a leave vote that never materialised, so we should probably take their latest blurts with a pinch of salt.
Brexit uncertainty cl;early hitting UK GDP and investment. GDP growth in 2018 1.4pc, weakest since the financial crisis. Business investment has contracted in past 4 quarters and now nearly 4pc down on a year ago. UK already counting the cost and we have not left the EU yet!
— Andrew Sentance (@asentance) February 11, 2019