Drop in UK's economic growth: what the experts say
Economists’ opinions are split between those alarmed by ‘dramatic’ slowdown and others confident the figures will soon be revised upwards
Britain's economic growth rate halved in the first quarter of the year, from 0.6% to 0.3% – dealing a blow to the government's election hopes.
Jeremy Cook, chief economist at the international payments company World First, says Britain has suffered a "dramatic" slowdown:
Q1 2015 was the slowest three-month period of growth in the UK since the last quarter of 2012.
Industrial and manufacturing numbers from the UK economy through January and February have been poor and, for once, the services sector has not been able to make up that deficit. That, in itself, is worrying.
Q1 should have seen stronger household consumption, with lower energy and fuel bills helping the pockets of average consumers. Wages are rising in real terms and unemployment is falling. To have the slowest level of service sector growth in over 2.5 years is quite confusing.
Cook points out that these preliminary readings of GDP are often revised as more data is analysed; but not until after the general election ...
Dr Howard Archer, of IHS Global Insight, says the figures are unwelcome news for David Cameron and Nick Clegg:
Given that the Conservatives and Liberal Democrats are hoping that many undecided voters will ultimately decide to vote for them due to their management of the economy, this marked slowdown in growth is particularly unwelcome news coming just over a week before the general election.
However, the Conservatives and Liberal Democrats can probably argue with some justification that increased uncertainty ahead of the general election has hampered growth, likely leading to business caution – particularly on investment.
They can also point to still relatively decent year-on-year GDP growth of 2.4% in the first quarter.
Stephen Ibbotson, director of business at the Institute of Chartered Accountants in England and Wales, says political uncertainty and the Greek crisis are hurting the economy.
This is a sharp drop in GDP growth that few economists saw coming. Our research suggests that businesses have hit pause amid growing political uncertainty over what the next government may look like, and ongoing malaise in the eurozone. The fall in construction is worrying, although the all-party pledge to build more homes after the election may be the shot in the arm that the sector needs.
Lee Hopley, chief economist at EEF, the manufacturers' organisation, hopes production output will pick up in 2015:
Today's data is disappointing but unsurprising, with the UK moving from being one of the fastest growing developed economies to posting the weakest rate of expansion in over two years.
Given that we'd already seen signs of weakening output earlier this year, the maths was always going to point to a slowdown. Nevertheless, manufacturing has held up with the sector, now seeing eight quarters of growth. And with surveys suggesting industry sentiment is looking reasonably firm, the sector should continue to contribute to growth in the months ahead.
As ever with estimates, future revisions can't be ruled out, but it does point to the need for the next government to focus on delivering a competitive and predictable environment to keep business growth on track.
David Kern, chief economist of the British Chambers of Commerce, believes the growth figures may be revised higher next month.
Although we expected a slowdown in GDP growth, following weak construction and production figures, the scale of the decline estimated by the ONS understates the true momentum in the economy.
It is likely that the services sector rose by more than 0.5% – in particular we are sceptical that business and financial services output was broadly flat in the quarter. It would not be surprising if this estimate was upgraded in due course.