UK GDP growth slowed to 0.2% in Q4 2018, lowest annual growth in 6 years

By Alexander Joe

The UK economy grew by 0.2% in the final three months of 2018, according to the Office for National Statistics (ONS), after 0.6% growth in the previous three-month period.

The ONS said in its “GDP monthly estimate, UK: December 2018” that declines in factory output, car production and construction contributed to the slowdown.

Production output fell by 1.1% – the steepest decline since the fourth quarter of 2012 – including a 0.9% drop in manufacturing output. In the construction industry, output fell by 0.3%.

Growth in the fourth quarter was driven by professional, scientific, administration and support services within the services sector.

Business investment fell by 1.4% in the final quarter of 2018, marking the fourth consecutive quarter of decline.

Business investment has been affected by a number of factors, including uncertainty over the Brexit outcome – the UK is now just a little over six weeks from its due date to leave the European Union. 

Figure 1_ Quarterly growth slowed after a strong Quarter 3

Commenting on the GDP figures, ONS Head of GDP Rob Kent-Smith said: “GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining. However, services continued to grow with the health sector, management consultants and IT all doing well.”

UK GDP growth by month
October 2018 November 2018 December 2018 Quarter 4 2018
GDP 0.2% 0.2% -0.4% 0.2%
Index of Services 0.3% 0.3% -0.2% 0.4%
Index of Production -0.3% -0.3% -0.5% -1.1%
Manufacturing -0.5% -0.1% -0.7% -0.9%
Construction -0.4% 0.1% -2.8% -0.3%
Agriculture 0.5% 0.5% 0.4% 1.1%

Source: Office for National Statistics – GDP monthly estimate

Monthly data showed that growth actually shrunk by 0.4% in December. However, as Kent-Smith pointed out, monthly data can be volatile. 

Kent-Smith said: “Declines were seen across the economy in December, but single month data can be volatile meaning quarterly figures often give a better indication of the health of the economy.”

UK economy grew by 1.4% in 2018, six year low

The fourth quarter data means that the UK expanded by 1.4% in 2018, down from 1.8% in 2017. This makes 2018 the weakest year of GDP growth since 2012. The last time it was weaker was in 2009. 

Chancellor Philip Hammond responded to the GDP figures. He said in a tweet that the UK’s economy “continues to grow and remains fundamentally strong,” adding that the country is currently enjoying the “longest unbroken quarterly growth streak of any G7 nation.” 

Shadow chancellor John McDonnell was quoted by The Guardian as saying: ‘The evidence is mounting that the combination of the Government’s shambolic handling of Brexit and nine years of austerity is causing real damage to our economy. ‘Business investment has been falling for months now, as uncertainty and the fear of No Deal cause immediate damage to confidence.

‘Six consecutive months of decline for the manufacturing sector hasn’t happened since 2009.

‘The Government must act now to take No Deal off the table and Philip Hammond must use his Spring Statement to end the disastrous austerity policy which has done so much to damage the economy.’