British economic growth slowed in the last three months of 2018 as businesses slashed investment amid deepening fears about the Brexit process.
As firms cut back, shoppers kept the economy growing, shrugging off fears about the UK’s imminent departure from the EU.
But output expanded just 0.2 per cent in the final quarter, down from 0.7 per cent in the previous three months, the Office for National Statistics (ONS) said.
The figures released on Friday confirmed a previous official estimate of growth.
Damage from a fourth consecutive fall in business investment was offset by household spending which was 0.3 per cent higher in the final quarter.
The ONS highlighted that this has been partly fuelled by debt after households and businesses spent more than they earned.
“Households have traditionally been a net lender,” the ONS said.
“However, in recent times that has not been the case, as households have now been net borrowers for the ninth consecutive quarter, which is an unprecedented run.”
Brexit helped drag investment down 2.5 per cent in the final quarter of 2018 compared to a year earlier, its worst slump since the financial crisis.
With MPs still undecided on the form that Brexit will take, firms remain reluctant to pump money into equipment, technology and research.
Research by the Bank of England this month said that 70 per cent of the fall in investment was due to Brexit.
However, consumer spending during last year’s hot summer was higher than previously thought, the ONS revealed on Friday.
Analysts had expected consumers to hold back after the 2016 referendum, but retail sales remained strong in January and February.
That helped lift annual GDP growth to 1.4 per cent from a previous estimate of 1.3 per cent.
Experts have warned that this will not be sustainable in the long run however. Productivity – the amount each worker produces per hour – remains at a virtual standstill and the latest data suggests it may have even going into reverse.
Without investment from businesses and the government to make the economy more efficient, productivity is not forecast to pick up to any significant extent.
The gap between the value of British exports and imports also widened in the last quarter.
The ONS said there was little evidence of widespread stockpiling to guard against potential disruption caused by a no-deal Brexit.
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