UK economic growth slowed to 2.2% last year – significantly down on 2014’s 2.9%

28th January 2016

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The British economy expanded by 0.5% in the final three months of 2015, bringing the annual growth rate to 2.2%, the slowest for three years according to official figures released on Thursday.

The latest data from the Office for National Statistics show the final quarter of last year slightly outpaced the previous three-month’s total of 0.4% growth.

However the annual rate fell significantly short of 2014’s tally of 2.9%.

Notably in November the Office for Budget Responsibility forecast that the UK economy would grow 2.4% in 2015.

Ben Brettell, senior economist at Hargreaves Lansdown however said that given the recent poor retail sales figures – down 1% in December compared with 2014, it had become clear that forecast would be missed.

Weaker construction and production output are the primary reasons for the slowdown, which could prompt concerns that the UK economy’s reliance on the services sector is increasing further.

Production output declined 0.2% in the fourth quarter and construction was down by 0.1%, whereas the dominant services sector grew by 0.7%.

Brettell  said: “Your interpretation of today’s GDP figures will depend on whether you take a ‘glass half full’ or a ‘glass half empty’ view of the UK economy. The bigger picture is that growth remains lacklustre, but reasonably resilient.

“A slowdown in emerging markets combined with increased uncertainty in global financial markets was bound to weigh on growth, but the domestic economy remains in reasonable health despite these headwinds.”

This is only the first estimate of GDP – based on less than half of the data which will ultimately be available.

“Revisions to today’s figures are likely in the coming months. Looking forward, the low oil price should continue to aid the domestic consumer, but neither wage growth nor inflation look anywhere near strong enough for the Bank of England to consider higher interest rates. 2016 looks set to be another year of the ‘Goldilocks economy’,” said Brettell.

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