The UK economy managed to dodge recession today, but the annual growth is the slowest it’s been since 2010. Britain’s economy grew at its slowest pace in nearly a decade during the three months to September as the global slowdown and Brexit worries continue to hit manufacturing and business investment.
Whilst the economy managed to dodge an outright recession, the rebound in quarterly growth was smaller than the 0.4% expected figure, coming in at 0.3%. Output fell in August and September when the UK looked at risk of leaving the EU without a transition deal.
A month before an early election, finance minister Sajid Javid hailed what he called “solid” growth figures, a view challenged by the opposition Labour Party. “The fact that the government will be celebrating 0.1% growth in the last six months is a sign of how low their hopes and expectations for our economy are,” Labour’s top finance official John McDonnell said.
Many economists have said ongoing political uncertainty and a weak global backdrop could prompt the Bank of England to cut interest rates next year, even if Prime Minister Boris Johnson passes his Brexit deal before the new January 31 deadline. Britain’s economy has lost momentum since the 2016 Brexit referendum, before which it typically grew more than 2% a year.
Last week the BoE nudged up its growth forecast for 2019 to 1.4% from 1.3%. This would be the same growth rate as last year and the weakest since the financial crisis. For 2020, the BoE expects a slowdown to 1.3%. Two BoE policymakers voted to cut rates last week and others could follow if growth remains weak and uncertainty persists about the longer-term trade ties between Britain and the EU.
Brexit news- A boost to Johnson
Brexit Party leader Nigel Farage has said today that his party would not contest 317 Conservative Party seats in the December election but would contest nearly all other seats, a significant boost for Prime Minister Boris Johnson.
Farage said he did not want anti-Brexit parties to win the election so was standing down candidates in the seats won by the Conservatives in the 2017 election.
“The Brexit Party will not contest the 317 seats the Conservatives won at the last election,” Farage said, adding that he had made the decision overnight. A week ago, he promised to field 600 candidates.
As a result of this news, the Pound leapt by more than half a cent against the Euro and US dollar, pushing GBP/EUR into the high 1.16’s and GBP/USD into the 1.29’s. The markets have taken the news as pound positive as it increases the chances of a conservative government and not Labour.