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Manufacturing and construction blamed as recovery slows

By Ben Woods

Published 28/04/2016

George Osborne
George Osborne

The UK economy slowed in the first quarter of this year following a slump in the manufacturing and construction industries, figures show.

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.4% in the first three months of 2016 - down from 0.6% in the fourth quarter of last year.

The downward impact on UK growth was driven in part by a poor performance from the manufacturing industry, which fell by 0.4% in the first three months of the year, compared with a 0.1% rise in the quarter before.

Overall production was down 0.4% between January and March.

The construction industry also dropped back in the first quarter, falling 0.9% compared with an increase of 0.3% in the fourth quarter.

But Britain's dominant services sector, which accounts for more than 78% of the UK economy, made strong ground, lifting 0.6% in the first quarter.

It came as the index for services showed that output increased by 0.1% between January and February this year - the same level of growth as between December and January after the ONS revised down its figure by 0.1 percentage points.

Esmond Birnie, PwC chief economist in Northern Ireland, said the data showed that the services sector - everything ranging from estate agents to restaurants -was underpinning the economy.

He added: "We remain cautiously optimistic that the UK can rebound in the second half of the year.

"For Northern Ireland, that would tend to confirm our earlier forecast of slower recovery in 2016, where we are anticipating growth of 1.4%, down from 1.5% in 2015 and significantly behind forecast UK economic growth of 2.2% for all of 2016."

ONS chief economist Joe Grice said its initial estimate for first quarter GDP showed the UK economy had slowed down.

He added: "These figures suggest growth has slowed as compared with the pace up to the middle of last year.

"Services continue to underpin the economy but other sectors have shown falling output this quarter."

Chancellor George Osborne said the figures showed that uncertainty around a Brexit was rubbing off on the economy.

"It's good news that Britain continues to grow, but there are warnings that the threat of leaving the EU is weighing on our economy.

"Investments and building are being delayed, and another group of international experts, the OECD, confirms British families would be worse off if we leave the EU.

"Let's not put the strong economy we're building at risk, and vote to Remain on June 23," he added.

Earlier yesterday, the head of the Organisation for Economic Co-operation and Development (OECD) said leaving the EU would be the equivalent of imposing a "tax" of one month's income on UK workers.

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