Reuters / Paul Hanna
LONDON — On Friday, new data from the Office for National
UK GDP growth slowing to just 0.3% in the
first quarter of 2017.
After close to 10 months of shockingly strong growth, the numbers
confirmed what economists have been predicting for a long time —
that Brexit will have a materially negative impact on the British
The 0.3% growth in the first quarter marks the slowest
growth since the beginning of 2016, and
largely driven by a drop-off in the dominant services sector, the
Reasons for the slowdown were simple. As the falling
pound — which has dropped 13% since June 23 last year — has
pushed up inflation in recent months, regular Brits have
started to feel the pinch, spending less, and slowing the
consumer boom that has fuelled the country’s economic performance
in the past handful of years.
With inflation set to rise further over the course of 2017,
that consumer slowdown could intensify. However, there are
reasons to believe that things not actually be that bad
for the economy for the rest of the year.
Writing shortly after the GDP data was released, Chris
Williamson, the chief business economist from IHS Markit — the
compiler of the widely respected PMI surveys —
“A further slowdown is by no means a
sure thing. Business surveys showed a surprise upturn in March,
making up for some of the weakness seen earlier in the
“The all-sector PMI rallied to a level consistent
with a quarterly GDP growth rate of 0.5% on the back of
higher service sector business activity
inflows of new business across the three PMI surveys showed the
second-strongest rise for over a year, suggesting that business
activity growth may have picked up further in
Williamson’s evidence is also backed up by a newly released
survey from the respected lobbyist, the Confederation of British
Industry, which showed that growth in British private sector
firms picked up strongly in the three months to
Survey participants in the UK’s key sectors “showed
that growth rose to a balance of +18% – the highest since
December 2015 – climbing from the balance of +11% in the three
months to March,” the CBI said.
Here is the chart:
“It’s good to still see momentum in the economy according
to our surveys,” Rain Newton-Smith, the CBI’s chief economist
said in a statement alongside the data.
Let’s be clear. Britain leaving the EU is going to damage
the British economy.
Consumer spending will continue to slow, impacting GDP growth
and dragging on living standards. But things might not be quite
as bad as we expected.