Brexit fears put brake on UK growth as house prices slide

Britain is leaving the EU in March 2019
REUTERS
Russell Lynch4 January 2019

Brexit fears have ground the UK economy to a virtual halt and triggered the biggest slide in house prices since 2011, an avalanche of gloom-laden new year data revealed on Friday.

Anxiety over a potentially catastrophic no-deal EU exit is paralysing business confidence, which has crashed to levels barely seen since the financial crisis, says financial data firm IHS Markit.

Its latest snapshot of services, manufacturing and construction firms is consistent with growth of just 0.1% across the wider economy in the final quarter of last year — the weakest for six years. “Clarity on Brexit is needed urgently in order to prevent the economy sliding into contraction,” chief business economist Chris Williamson said.

The warning came as MPs return to Westminster next week after the recess, with a looming vote on Theresa May’s Brexit deal unlikely to win support.

The IHS/Chartered Institute of Procurement & Supply’s latest gauge of services activity, where a score over 50 signals expansion, improved modestly to 51.2 from 50.4. But firms remain reluctant to take on new staff, clients are delaying orders and consumer demand is subdued in a sector accounting for more than three-quarters of overall growth.

Cips director Duncan Brock said: “Indecision is squeezing the life out of activity, new orders, and consumer confidence. The sector is moving through a dark tunnel without a speck of light at the end.”

ING economist James Smith added: “It looks increasingly unlikely that the Bank of England will be able to hike interest rates again before summer.”

The figures came as lender Nationwide revealed that December was the worst month for house prices since August 2011, with prices down 0.7% on the month.

Despite record employment and a gradual recovery in real-terms pay, the mutual’s chief economist Robert Gardner said the weakness was driven by Brexit nerves. “In the short term it will depend how quickly the political uncertainty lifts. Until it does, it is likely to be a drag and anchor on sentiment,” he said.

The Bank of England added to the gloom with figures showing a slump in mortgage approvals in November. Loan approvals for new house purchases dropped almost 5% to 63,728 — the lowest for seven months. Shoppers also showed signs of reining in with annual consumer credit growth of 7.1%, the weakest since March 2015.

MORE ABOUT