UK economic growth was flat in January, dashing hopes of a post-election bounce as the country braces for the impact of the global coronavirus outbreak.
The lack of any uplift in gross domestic product at the start of 2020, compared with December, follows a subdued year for the UK economy, which stagnated in the final quarter of 2019 as political uncertainty weighed on business activity, particularly in manufacturing.
The latest data, released by the Office for National Statistics on Wednesday, left GDP for the three months to January unchanged. Economists’ consensus forecasts had pointed to 0.2 per cent growth for January with a slight boost expected following December’s decisive general election result.
The economy had expanded 0.3 per cent in December and business confidence surveys had indicated the trend would continue with an improvement in business and consumer sentiment before the extent of the coronavirus outbreak became apparent.
“The post-election rebound in activity failed to materialise in January,” Ian Stewart, chief economist at Deloitte, said. “It’s a disappointing start to the year ahead of the inevitable knock to growth from coronavirus.”
Rob Kent-Smith, the ONS’s head of GDP, noted that only construction had offset the decline in output during the past three months in sectors including manufacturing, automobiles and machinery.
“The dominant services sector also showed no growth in the latest three months, with falls in retail and telecoms balanced by strength in rentals, employment and education,” he said.
The prospects for the economy have since been further dented by the coronavirus outbreak, which the OECD has said could halve global growth.
In January the outbreak was only in its early stages, so the GDP figures do not reflect the impact of the virus. But economists warned that the output data from March onward were likely to show a significant hit, as people take action to self-isolate. The government worst-case scenario foresees 20 per cent of workers could be off sick when the disease hits its peak.
“With the economy suffering a subdued start to 2020 and coronavirus poised to take a major toll on activity, we are slashing our 2020 GDP growth forecast to just 0.5 per cent from 1.2 per cent,” Howard Archer, chief economist for EY Item Club, said.
“There has to be a very real danger that the economy could contract in the second quarter.”
Responding to the threat of the virus, the Bank of England on Wednesday announced a package of measures including an interest-rate cut of 0.5 percentage points to 0.25 per cent.
The move by the bank came ahead of the the new chancellor Rishi Sunak presenting the Budget.
