- Capital Economics
The British economy slowed in the first quarter, hit by an ongoing decline in the industrial sector and concerns that a looming vote on the country's membership of the EU will hurt the economy further. According to the Office for National Statistics, the UK economy expanded 0.4% in the three months through March, following a 0.6% growth in the final quarter of 2015. Measured on an annual basis, Britain's economic output increased 1.6%, down from 2.4%. The slowdown was led by a slump in manufacturing and construction, which offset strong growth in the UK's dominant services sector. Output increased in the services sector by 0.6% in the first quarter, but production dropped by 0.4%, construction output fell 0.9% and agriculture slid 0.1%.
Bank of England officials said that they expect the economy to expand more slowly in the first half of the year than it did in late 2015 as uncertainty over the referendum outcome forces companies to delay hiring and investment. The OECD said that the British economy could be as much as 3% smaller by 2020 if it leaves the EU than if it stayed in. BoE Governor Mark Carney, meanwhile, highlighted a sharp depreciation in Pound's exchange rate versus other currencies should Briton's vote to leave the EU could boost the annual rate of inflation.
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