Britain’s economy slowed to a virtual standstill in the first three months of 2018, in the weakest period of activity in more than five years.
Office for National Statistics figures showed a sharp contraction in the construction sector, weaker manufacturing growth and a squeeze on consumer spending power all contributed to GDP growth of 0.1% in the first quarter.
The performance of the economy was much worse than the Bank of England had been expecting and almost certainly puts paid to any chance of an interest rate rise when the monetary policy committee meets early next month.
The ONS said the “beast from the east” – the period of unusually cold weather in late February and early March – had only been a small factor in slowing the economy from growth of 0.4% in the final three months of 2017.
Rob Kent-Smith of the ONS said: “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 supply and online sales.”
Over the year to the first quarter, the economy grew by 1.2%, well below its five-year average of 2.2% and the slowest annual rate since the spring of 2012.
The ONS’s flash estimate showed construction output was down 3.3% in the first three months of the year, while manufacturing growth slowed to 0.2%.
Production, which includes electricity and gas supply in addition to manufacturing, rose by 0.7% as a result of households using more energy during the cold weather. Services, which account for almost four-fifths of the economy, grew by 0.3%.
Jeremy Cook, the chief economist at WorldFirst, said “It’s not just UK voters who could call themselves the Jams (Just About Managing), it now seems that the wider UK economy is in that predicament too.
“At the beginning of last week, the expected probability of a base rate hike at May’s Bank of England meeting was around 86%; it now sits at 34% and sterling is sliding as investors price in a delay to increases in the base rate until December.”