2018.05.2719:05:00UTC+00UK Growth Slumps to 5-Year Low as Business Investment Drops

Declining business investment and the weakest household spending growth in over three years recorded a bad start to 2018 for Britain's economy, as official data recently showed that the UK nearly stagnated.

The Office for National Statistics confirmed its previous estimate that GDP growth tumbled to 0.1 percent in the first quarter, while sticking to its view that the “beast from the east” had little impact. The ONS said it saw a longer-term pattern of slowing growth, especially among consumers who were hit by a rise in inflation after the 2016 Brexit vote.

The figures show the services industries contributed the most to GDP growth, with a rise of 0.3 percent in the first quarter, while household spending grew at a paltry 0.2 percent. The construction industry fell by 2.7 percent and business investment dropped 0.2 percent.

The latest figures will further fuel concerns over the strength of the UK economy, amid growing signals for deteriorating growth as Britain prepares to leave the EU in 2019. Some economists, including officials at the Bank of England, thought the growth rate would be revised higher as more data became available.

Business investment fell by 0.2 percent quarter-on-quarter, its worst performance since mid-2015, the ONS said. Net trade failed to contribute to growth and household spending slightly increased by only 0.2 percent on the quarter, the weakest increase since the fourth quarter of 2014.

Earlier this month the BoE said it expected growth in the first quarter would eventually be revised up to 0.3 percent. It has pencilled in quarterly growth of 0.4 percent for the current April to June period.

Following the release of weak first-quarter figures from the ONS, the BoE slashed its forecast for annual average growth in 2018 to 1.4 percent from 1.8 percent previously

Sterling and British government bonds were little changed by the data.