The UK economy expanded at a rate of 0.5% in Q4 2015, data released by the Office for National Statistics has said, confirming the original estimate. This means that the full year growth for 2015 came in at a respectable 2.2%.Whilst this still represents the slowest rate of expansion that the UK economy has seen since 2012, it compares well with other leading economies (of course, the fact that the world’s second largest economy, China, expanded at an official rate of 6.9% is being seen as grounds for extreme pessimism!). There will be a final revision of the GDP estimate when all of the data becomes available, but it ought to confirm this value.
The Q4 2015 growth represents the twelfth consecutive quarter where the UK economy managed straight expansion, ending the erratic pattern seen at the height of the Global Financial crisis between 2009 and 2012.
The dominant term in the UK economy is the service sector and it managed to expand by 0.7% in Q4. By contrast, manufacturing output, including power production and what remains of UK heavy industry, saw a contraction of 0.5% in the final quarter of 2015. Household expenditure continued to grow, but at a softer rate than in Q3; it still managed an expansion of 0.7%. The rise in disposable income in the UK is being seen as an engine of expansion currently. However, for the nation’s long-term economic health, productivity and business investment need to gain further traction.
As the UK moves towards an end of June decision on its continued membership of the EU, investment decisions and confidence may suffer. Current analysis of polls suggest a narrow lead for those wishing to remain in the EU; a position backed by most politicians and business leaders, but the slim majority and those undecided mean that uncertainty is likely to prevail until the decision is taken.