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UK economy grinds to a halt

The British economy has stalled.GDP grew by just 0.1% in the first quarter of 2018 compared to the previous th...

Posted: Apr 27, 2018 12:15 PM
Updated: Apr 27, 2018 12:15 PM

The British economy has stalled.

GDP grew by just 0.1% in the first quarter of 2018 compared to the previous three months, representing the weakest expansion in more than five years.

Economists were expecting growth of 0.3%, after a 0.4% expansion in the fourth quarter of 2017.

Cold weather was partly to blame, but the Office of National Statistics said the effect of snow on retail sales and construction was "generally small" and there was very little impact on other areas of the economy.

The pound slumped in response, falling 0.7% to $1.38, as the weak data undermines the case for another rise in UK interest rates any time soon.

"The downside surprise in GDP figures is probably the final nail in the coffin for the chance of an interest rate hike in May," said Paul Hollingsworth, senior UK economist at Capital Economics.

Related: London's property market is in a coma

Growth was hit by a sharp decline in construction. The real estate industry has been hit by rises in property taxes and Brexit, with potential buyers putting their plans on hold because of the economic uncertainty.

The Royal Institution of Chartered Surveyors (RICS) said earlier this month that weakness in London's housing market had caused its UK house price indicator to hit a five-year low.

"Our initial estimate shows the UK economy growing at its slowest pace in more than five years, with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly," said Rob Kent-Smith, a statistician at the Office for National Statistics.

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