UK economy loses momentum as Brexit deadline looms

Brexit uncertainty helped drag the UK economy to a near standstill at the end of 2018, with subdued growth conditions persisting across the British services sector, according to a recent IHS Markit survey.

The services industry plays a vital role in driving economic growth in the UK, but the sector has shown ‘worrying signs of having lost steam amid intensifying Brexit anxiety,’ Chief Business Economist at IHS Markit Chris Williamson said.

‘The final two months of 2018 saw the weakest back-to-back expansions of business activity since late-2012 and highlight how clarity on Brexit is needed urgently in order to prevent the economy sliding into contraction,’ Williamson added.

House price growth slows

Annual house price growth in the UK also slowed to its weakest pace since February 2013 in December, with prices falling 0.7% in the final month of the year, according to Nationwide’s house price index.

‘It is likely that the recent slowdown is attributable to the impact of the uncertain economic outlook on buyer sentiment, given that it has occurred against a backdrop of solid employment growth, stronger wage growth and continued low borrowing costs,’ Chief Economist at Nationwide Robert Gardner said.

‘Near term prospects will be heavily dependent on how quickly this uncertainty lifts, but ultimately the outlook for the housing market and house prices will be determined by the performance of the wider economy – especially the labour market,’ he added.

Consumer borrowing declines

The extra amount consumers have borrowed each month to buy goods and services has slowed in the second half of 2018.

Since July, the average monthly flow of consumer credit has been £0.9 billion, compared with £1.5 billion between January 2016 and June 2018, according to figures from the Bank of England.

In November, the total net flow was £0.9 billion, with net credit card borrowing of £0.4 billion, and borrowing for other loans and advances of £0.5 billion.