UK economy stalls, as Bank of England eyes rate cut

LONDON (AFP) – Britain’s economy has stalled, official data showed yesterday, as Brexit and political uncertainty contributed to slashing manufacturing output, heaping pressure on the Bank of England (BoE) to cut interest rates.

Gross domestic product (GDP) contracted 0.3 per cent last November, the Office for National Statistics (ONS) said in a statement.

It grew only 0.1 per cent in the three months to the end of November, the ONS added. Manufacturing, meanwhile, slumped 1.7 per cent last November.

Speaking ahead of the data a Bank of England policymaker, Gertjan Vlieghe, hinted at a potential vote in favour of a January cut to the BoE’s main interest rate, weighing on the pound yesterday.

It followed comments last Friday by fellow policymaker Silvana Tenreyro, who said she could support a rate cut from the current 0.75-per cent level, if the economy did not strengthen.

And last Thursday, the bank’s outgoing governor, Mark Carney, said the monetary policy committee was looking at the merits of near-term stimulus.

As for the latest GDP data, “a poor performance last November was always on the cards given that the uncertainties facing the economy were at a peak with the general election looming and doubts over what would happen on the Brexit front after it had been delayed again from 31 October”, noted Chief Economic Advisor to financial researchers EY ITEM Club Howard Archer.

“It is clear that businesses were cautious in their behaviour while it also appears that consumers were reluctant to spend.”

British Prime Minister Boris Johnson’s Conservatives convincingly won a general election in December that has broken the deadlock over the United Kingdom’s (UK) departure from the European Union (EU).

Britain’s Parliament last week finally approved Brexit, ending years of arguments that toppled two UK governments.

“We expect the economy to get a lift in the early months of 2020 from a more settled domestic political environment following the Conservatives substantial win… and an easing of near-term Brexit uncertainties as the UK leaves the EU with Johnson’s deal on 31 January,” said Archer.

A view of the Bank of England building in central London on February 7, 2019. Britain’s economy shrank last November, official data showed on January 13, as Brexit and political uncertainy contributed to slashing manufacturing output, heaping pressure on the Bank of England to cut interest rates. PHOTO: AFP