UK economy wilts amid Brexit jitters

Bloomberg

The UK economy buckled under the strain of Brexit uncertainty in the fourth quarter. Gross domestic product (GDP) increased a smaller-than-forecast 0.2 percent, compared with 0.6 percent in the third quarter. December alone saw the economy shrink by 0.4 percent, the most since before the 2016 vote to leave the European Union.
The slowdown over the quarter came as businesses cut investment for a fourth consecutive quarter, the longest continuous decline since the financial crisis, and the weakening global economy hit trade. The pound fell 0.3 percent to $1.2909 as of 9:46 am in London.
But there was no widespread evidence of stockpiling as the prospect of a no-deal Brexit looms larger, with inventories rising just 1.6 billion pounds ($2 billion) in the quarter.
While organizations such as Heathrow airport and Uni-lever have said they are keeping more on the storeroom shelf to guard against disruptions to supplies brought in from the EU, the Office for National Statistics said a relatively small number of firms reported doing so.
The economy is facing the worst year for growth since 2009, with economists warning of a recession if Britain leaves the EU without a deal to smooth the transition on March 29. The Bank of England sees growth of 0.2 percent in the first quarter, but the sudden loss of momentum at the end to 2018 suggests the economy could stagnate, as indicated in recent purchasing manager surveys.
With wage pressure building, the BOE might in different circumstances be preparing to raise interest rates. But officials last week signaled they have no intention of doing so until the “fog of Brexit” has cleared.
The fear gripping business was illustrated this month when Japanese carmaker Nissan scrapped plans to build a new model in Sunderland. Airbus, which makes wings for commercial aircraft in Britain, has also threatened to switch investment elsewhere. Business investment fell 0.9 percent in 2018.
Brexit is not the only threat facing the economy. Major markets from the Eurozone to China are losing momentum, weakening demand for British exports. Net trade cut 0.12 percent points from growth in the fourth quarter as the trade deficit hit the highest in more than two years.
Consumer spending growth stayed at 0.4 percent in the fourth quarter but business investment slumped 1.4 percent, the most since the start of 2016. Services, the largest part of economy, slowed to 0.4 percent growth. In December, all the main sectors of the economy shrank, with manufacturing falling for a sixth consecutive month, the longest run of declines since the financial crisis.
The fall in overall GDP was the largest since March 2016. The trade deficit narrowed to 12.1 billion pounds in value terms in December. Growth in 2018 slowed to 1.4 percent, and the BOE sees a further moderation this year to 1.2 percent. GDP rose 1.3 percent in the fourth quarter from a year earlier, the weakest since the second quarter of 2012.

Slow boat to Brexit oblivion leaving soon for exporters
Bloomberg

Business is brisk at Nim’s Fruit Crisps. Pineapples are imported from Costa Rica, kiwis from Italy and oranges and lemons from Spain. They’re then turned into healthy snacks for export to Israel, South Africa, Hong Kong and elsewhere.
You wouldn’t know that the company in southeast England is already about to head into the post-Brexit world without knowing what it will look like.
Nim’s will ship goods in coming weeks that are due to arrive at their destination after March 29, the date the UK plans to leave the European Union. The country still can’t agree on a deal to keep borders open and trade flowing. “We’re just going to wing it really,” founder Nimisha Raja said. “There’s not much more we can do.’’
The problem for British exporters is that the UK is yet to roll over the majority of the beneficial trade terms aro-und the globe it gets through EU membership. That means goods being readied for dispatch that take as long as six weeks to reach destinations in Asia could end up sat in quarantine or face dispu-
tes over who pays any new customs duties.
“The uncertainty is not something that will happen in early April, it is something that is with us’’ now, Austrian Foreign Minister Karin Kneissl said on BBC. Deals between the EU and other countries cover more than 11 percent of Britain’s trade. Liam Fox, the minister in charge of international trade, said last month that the major deals would be rolled over before March 29, though others wouldn’t.
“There will be a frantic look at contracts,” said Alex Veitch, a head of policy at the Freight Transport Association. “Chan-ges in duties could increase the cost of a product massively.” Some companies are trying to speed up delivery times to beat the deadline.