UK economy slows to lowest rate for three years

THE UK economy grew 2.2% in 2015, after the fourth quarter recorded a 0.5% increase.

The gross domestic product (GDP) edged up slightly in the final three months of the year but 2015 still finished behind the 2.9% growth enjoyed in 2014.
 
Manufacturing showed no growth while the production sector shrunk by 0.2%. However the service sector and agriculture grew by 0.7% and 0.6% respectively.

The figures from the Office for National Statistics matched the consensus forecast, which had expected 0.5% growth.

Commenting, Greater Birmingham Chambers of Commerce said the Government should help rebalance the economy and revive the fortunes of the region’s struggling manufacturers.

Chief executive Paul Faulkner called for action to ease the effects of a ‘two-speed economy’ and provide a New Year boost to the wealth-creating manufacturing sector.

He said: “While UK GDP has met its forecast target, we are conscious of a two-speed economy that is supporting GDP, with a growing service sector, but a struggling manufacturing one.

“Our Quarterly Economic Survey (QES) for Q4 indicated that while Greater Birmingham service firms have been performing more strongly in view of UK sales and exports, manufacturing sentiment has fallen amidst a slowing world economy.  Low oil prices and a strong pound are providing further obstacles to their growth.

“It’s vital that the Government continues to work to rebalance the economy, especially if they are to support the fuelling of the Midlands Engine, which is a manufacturing heartland.”

He said the chamber was aware that owing to the slowing world economy the UK was likely to struggle in the next year to meet similar levels of GDP growth. He said the chamber supported the Bank of England’s view that now was not the right time to consider increasing interest rates.

A spokesman for the British Chambers of Commerce added: “The GDP figures demonstrate that the recovery remains fragile. While the services sector continues to grow, production is close to stagnation and the construction sector is now in recession.

“Every effort must be made to support both these sectors as we seek to rebalance the economy.”

Business leaders in Coventry and Warwickshire say the latest GDP figures reflect the mood among companies in the region.

Louise Bennett, chief executive of the Coventry and Warwickshire Chamber of Commerce, said that there was confidence among firms that the economy would continue to grow but that barriers remain.

She said: “The overall growth for 2015 is down compared to 2014 but still puts the UK economy among the strongest across the globe during turbulent times around the world.

“We know from the statistics and from our surveys and meetings with business across Coventry and Warwickshire that, generally, the economy is performing well.

“But, as we have said previously, there are hurdles to that growth – from being able to access the right skills through to having the land and property to expand into.

“So while the GDP figures should be welcomed we must also heed the warning that for the economy to continue to grow we have to overcome those barriers.”

John Hawksworth, chief economist at accountancy firm PwC, said: “Despite some global headwinds, the UK economy continued to deliver solid growth of 0.5% in Q4 2015, close to its long term trend rate. As in previous quarters, this reflected the strength of domestic demand and private services sectors, while manufacturing and construction output were broadly flat.

“Looking ahead, strong job creation, low energy prices and positive real income growth should keep consumer spending growth at a decent rate of around 2.5% in 2016. This  should allow the UK economy as a whole to deliver continued steady growth of just over 2% this year, despite recent financial market volatility.”  ir record low of 0.5%.” 

Chris Williamson, chief economist at analysts Markit, said: “The upturn masks an unbalanced economy and a slowing pace of expansion, with the annual rate of growth slipping to the weakest for almost three years. Survey data also point to a further loss of momentum in December.

“Uncertainty over ‘Brexit’, weak overseas growth and financial market volatility are all creating an unsettling business environment and point to downside risks to the economy in 2016.

“The coming year could easily see the pace of economic growth slow further from last year’s 2.2% expansion, and the chances are growing that we will see yet another year in which interest rates are left at their record low of 0.5%.”