Brexit worries put brakes on UK economic growth

Britain’s economy has lost momentum since the 2016 Brexit referendum, before which it typically grew more than 2 percent a year. (AFP)
Updated 11 November 2019

Brexit worries put brakes on UK economic growth

  • Britain’s economy has lost momentum since the 2016 Brexit referendum, before which it typically grew more than 2 percent a year
  • Household spending, which has been much more than resilient business investment, rose by 0.4 percent on the quarter

LONDON: Britain’s economy grew at the slowest annual rate in nearly a decade in the three months to the end of September, as a global slowdown and Brexit worries hit business investment and manufacturing.
Year-on-year gross domestic product growth slowed to 1.0 percent from 1.3 percent in the second quarter, Britain’s Office for National Statistics said, its lowest since the first three months of 2010 and just below economists’ forecasts in a Reuters poll of 1.1 percent.
The slowdown reflected a smaller-than-expected rebound in quarterly GDP growth after a contraction in the second quarter, when businesses faced an overhang of stocks of raw materials after Brexit was delayed from the end of March.
“Looking at the picture over the last year, growth slowed to its lowest rate in almost a decade,” an ONS spokesperson said.
During the third quarter, when Boris Johnson became prime minister, there were increasing concerns among businesses that Britain could have been heading for a no-deal Brexit on Oct. 31.
In the event, parliament forced Johnson to seek a delay and he has now called an early election for Dec. 12 in an attempt to win a large enough majority for his preferred Brexit deal before a new deadline of Jan. 31.
Gross domestic product expanded at a quarterly rate of 0.3 percent in the third quarter of 2019, below the 0.4 percent reading expected by the Bank of England, as well as by private-sector economists.
Britain’s economy has lost momentum since the 2016 Brexit referendum, before which it typically grew more than 2 percent a year.
Last week the BoE nudged up its growth forecast for 2019 to 1.4 percent from 1.3 percent — largely because of its expectation of a bigger pick-up in the third quarter than it forecast before.
This would be the same growth rate as 2018 and the weakest since the financial crisis, while for 2020 the BoE expects a further slowdown to 1.3 percent.
On top of Brexit, businesses across Europe have been suffering spill-over from the US-China trade war.
Euro zone annual GDP growth slowed to 1.1 percent in the third quarter from 1.2 percent in the quarter before.
Monday’s data showed business investment held steady in the third quarter versus economists’ expectations for a 0.5 percent fall.
Household spending, which has been much more than resilient business investment, due to falling unemployment and rising wages, rose by 0.4 percent on the quarter while government spending increased by 0.3 percent.


Saudi Arabia looks to cut spending in bid to shrink deficit

Updated 20 min 23 sec ago

Saudi Arabia looks to cut spending in bid to shrink deficit

  • Saudi Arabia has issued about SR84 billion in sukuk in the year to date

LONDON: Saudi Arabia plans to reduce spending next year by about 7.5 percent to SR990 billion ($263.9 billion) as it seeks to reduce its deficit. This compares to spending of SR1.07 trillion this year, it said in a preliminary budget statement.

The Kingdom anticipates a budget deficit of about 12 percent this year falling to 5.1 percent next year.

Saudi Arabia released data on Wednesday showing that the economy contracted by about 7 percent in the second quarter as regional economies faced the twin blow of the coronavirus pandemic and continued oil price weakness.

The unemployment rate among Saudis increased to 15.4 percent in the second quarter compared with 11.8 percent in the first quarter of the year.

The challenging headwinds facing regional economies is expected to spur activity across debt markets as countries sell bonds to help fund spending.

Saudi Arabia has already issued about SR84 billion in sukuk in the year to date.

“Over the past three years, the government has developed (from scratch) a well-functioning and increasingly deeper domestic sukuk market that has allowed it to tap into growing domestic and international demand for Shariah-compliant fixed income assets,” Moody’s said in a statement on Wednesday. 

“This, in turn, has helped diversify its funding sources compared with what was available during the oil price shock of 2015-16 and ease liquidity pressures amid a more than doubling of government financing needs this year,” the ratings agency added.