The UK economy grew at its slowest rate since 2012, with ONS statistics revealing that it had only expanded by 0.4 per cent compared to its expected 0.5 per cent. “A number of very small revisions to mining, energy generation and service” led to this shortfall, ONS’ head of GDP, Darren Morgan, explained.
This was but the beginning. IHS Markit’s chief economist, Chris Williamson, claimed most sectors had started the year in a “worryingly weak” state.
“The pace of UK economic growth slowed sharply,” he said. “Service sector expansion slid to a 16-month low in February, reflecting a marked waning in growth of demand for business and consumer-facing services such as hotels and restaurants. Demand for transport and communication services was down for the second straight month.”
Of course, Bank of England governor Mark Carney chalked it down to the Brexit vote. According to The Guardian, he told the Treasury that, “real incomes at the end of 2018 will be five per cent lower than the Bank had forecast before the EU referendum. That’s due to economic uncertainty and the weaker pound. Consumption growth has slowed and business investment has been lower as firms hit the pause button on major projects.”
The depreciation of the pound increased the cost of imports, while inflation hit workers’ wages hard. The talent pipeline was likewise hit by Brexit.
Immigration statistics revealed in February a record drop in EU net migration, with the number of EU citizens coming to the UK decreasing by 47,000 over the last year. It is now at a level comparable with 2014 and marks the highest number of people leaving the UK since 2008.
Sophie Barrett-Brown, head of the UK practice at Laura Devine Solicitors, explained that while a fall in net migration may seem like good news for those concerned about immigration, in reality it underlines a growing skills shortage.
“Behind every official statistic showing more workers leaving the UK and fewer arriving, the real story is vacancies unfilled and business potential unrealised,” she said. “Skilled EU nationals choosing to pursue opportunities outside the UK is not a success story for the UK.
“The biggest concern is the ongoing uncertainty employers face as the Brexit deadline of March 2019 approaches. With government now not due to publish proposals for the post-Brexit migration system until the end of 2018, employers are having to plan for any scenario and a number of businesses have already begun transferring some of their business functions overseas.
“While this may prove to be unnecessary once the new rules are known, businesses cannot hang around and wait, they have to plan now for the next several years.”
On a different note, the ONS also revealed that UK productivity levels continued to increase, rising by 0.8 per cent between October and December 2017. While the improvement is a welcome one, the figures are, nonetheless, a reduction on the 0.9 per cent increase in the previous quarter.
Talking to Real Business about the issue, Tony Danker, CEO of Be the Business, said: “We should not assume that the improvement reported in February means we have begun to tackle the UK’s long-standing productivity problem.
“We’re already a decade behind our competitors, so after weak productivity performance in 2017, business owners should make productivity a priority in 2018. As a nation we must show ambition and make productivity growth the engine of our competitiveness.
“As the UK prepares for Brexit, challenges for business continue to grow, from margins being squeezed to higher input and labour costs. Smart productivity strategies should be on the mind of every business.”