UK economy weaker in 2016 than previously estimated

Workers walk to work during the morning rush hour in the financial district of Canary Wharf in London, Britain, January 26, 2017. (Reuters photo)

The British economy picked up its pace of growth in the final three months of 2016, official figures show, but over the whole year, it was weaker than previously estimated and there were signs that the UK referendum to leave the European Union will increasingly act as a brake on growth in 2017.

Gross domestic product rose by 0.7 percent in the fourth quarter, faster than the preliminary reading of 0.6 percent, according to figures released Wednesday from the Office for National Statistics (ONS).

However, the pound fell after the report, which no longer showed the UK was the fastest-growing major advanced economy last year.

Business investment fell last year and slowing household spending growth raised questions about the outlook for 2017.

The ONS also revised its estimate for economic growth in 2016 to 1.8 percent from 2.0 percent, due to businesses stockpiling fewer goods and weaker exports in the first quarter of 2016.

"The UK economy needs another driver if it is not to have a significant slowdown in 2017," said Angus Armstrong, director of macroeconomics at the National Institute of Economic and Social Research. "The pattern of strong consumer spending and weaker business investment can only be a limited one.”

Business investment fell 1.0 percent in the fourth quarter compared with the July-September period. Firms are expected to decrease their investment plans as Britain negotiates its departure from the EU.

British Prime Minister Theresa May is due to trigger the Brexit process in the coming weeks.

There is broad consensus among economists that Brexit will have a prolonged effect of the British economy and will ultimately diminish output, jobs and wealth to some degree.

“We’d expect the sort of deal the UK is going for to result in some degree of trade destruction. And if we’re talking about reducing the level of migration, that’s likely to result in growth prospects being weaker,” said Andrew Goodwin, an economist at Oxford Economics.