February 11, 2019 / 3:27 PM / 7 months ago

UPDATE 2-UK economy at weakest since 2012, as Brexit, global worries bite

    * UK 2018 GDP +1.4 pct, lowest since 2012
    * Q4 GDP growth slows to 0.2 pct q/q from Q3's 0.6 pct
    * Business investment falls by most since 2010
    * Finance minister: economy "fundamentally strong"

 (Adds comment from Hammond, economists; euro zone context)
    By David Milliken and Andy Bruce
    LONDON, Feb 11 (Reuters) - Britain's economy slowed sharply
in late 2018, pushing annual growth to a six-year low as worries
about Brexit hammered business investment and a weakening global
economy weighed on trade, data showed on Monday.
    Quarterly growth fell to 0.2 percent between October and
December from 0.6 percent in the previous quarter, in line with
forecasts in a Reuters poll, while output in December alone
dropped by the most since 2016.
    "Brexit uncertainty, a slowing global economy and the
persistent financial squeeze on consumers and businesses (are)
increasingly having a suffocating effect on economic activity,"
British Chambers of Commerce economist Suren Thiru said.
    Sterling fell a third of a cent to below $1.29 after the
data, before recovering.
    Businesses are increasingly concerned about the lack of a
plan for March 29, when Britain is due to leave the European
    Prime Minister Theresa May has faced strong parliamentary
opposition to an agreement she reached with Brussels to avoid
reimposing checks on goods exported from Britain.
    For 2018 as a whole, UK growth dropped to its lowest since
2012 at 1.4 percent, down from 1.8 percent in 2017 and weaker
than the euro zone, which has outpaced Britain since 2016. 
    Last week the Bank of England chopped its forecast for
growth this year by 0.5 percentage points to 1.2 percent, which
would be the weakest year since the 2009 recession.    
    Other major economies around the world also slowed in late
2018, due in part to trade tensions between the United States
and China.
    Monday's data showed a net trade deficit lopped more than
0.1 percentage points from Britain's fourth-quarter growth rate.
Falling business investment did similar damage.
    Japanese carmaker Nissan          cancelled plans to build a
new car model in Britain last week, saying Brexit uncertainties
made it harder to plan for the future.             
    "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," Office for National Statistics
statistician Rob Kent-Smith said.
    In December alone, the economy contracted by 0.4 percent,
the biggest fall since March 2016.
    Finance minister Philip Hammond said the data showed the
economy remained "fundamentally strong" and that Britain's
Office for Budget Responsibility did not foresee a recession.
    "The economy has come in ahead of the OBR's forecast for
2018, and that is in the context of a weakening world economy
and increasing concerns about trade tensions around the world,"
he told the BBC.
    Business investment dropped 3.7 percent in the fourth
quarter compared with a year earlier, the biggest fall since the
first three months of 2010, when Britain was emerging from
recession. Investment has contracted for four consecutive
quarters, the longest run since the third quarter of 2009.
    Household spending - which offered an unexpectedly strong
boost to growth in mid-2018 - remained resilient, up 1.9 percent
on a year ago, and government spending picked up.

 (Editing by Peter Graff and John Stonestreet)
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