The Brexit effect: slow growth as firms stockpile

Britain's economy grew modestly as firms stockpiled for last month’s long-planned Brexit Day, official figures reveal today.

They showed GDP was up 0.2 per cent in February, lower than the 0.5 per cent rise the previous month but slightly above City expectations. Over the three months to February, GDP remained “subdued”, increasing by 0.3 per cent compared with the previous quarter, the Office for National Statistics said.

The ONS’s Rob Kent-Smith said: “GDP growth remained modest in the latest three months. Services again drove the economy, with a continued strong performance in IT.Manufacturing also continued to recover after weakness at the end of last year, with the often-erratic pharmaceutical industry, chemicals and alcohol performing well in recent months.” The statistics agency highlighted data showing a surge in manufacturing output was at least partly linked to manufacturers and firms hoarding goods in the run-up to what was supposed to be Brexit.

Companies stepped up production to build inventories in advance of March 29, Britain’s original Brexit Day, before the Government asked the EU for a first extension. The manufacturing sector recorded 0.9 per cent growth in February, after 1.1 per cent the previous month. The rise pushed manufacturing output to its highest level since April 2008, driven by domestic demand.

The ONS highlighted external evidence “that some manufacturing businesses have changed the timing of their activity as we approached the original planned date for the UK’s departure.”

It added: “Although the ONS does not routinely collect detailed data on the reasons behind the behaviour of businesses, as part of our survey validation we have found some qualitative evidence that supported this view but were unable to quantify its impact.” The official data also showed the construction sector eked out 0.4 per cent growth, after plunging 2.5 per cent in December, while the giant services sector grew by just 0.1 per cent.

Ruth Gregory of Capital Economics said: “The Brexit chaos may have sapped the economy of its momentum in March, as that is when the Brexit uncertainty has been greatest. All told, though, the solid growth rate in the three months to February should ease immediate fears of the economy stalling.” Ian Stewart, chief economist at Deloitte, said: “The UK is proving more resilient than expected in the face of a global slowdown and Brexit headwinds.” But Seamus Nevin, chief economist at manufacturers’ group Make UK, said the figures may not prove “the economic fundamentals are sound.”