U.K. Business Investment Weakened in Third Quarter
November 23 2017 - 5:09AM
Dow Jones News
By Wiktor Szary and Jason Douglas
LONDON--U.K. business investment softened visibly in the third
quarter of this year, new figures showed, a sign that uncertainty
linked to Brexit and Britain's future trading arrangements is
giving companies pause.
U.K. businesses' capital spending grew by a quarterly 0.2% in
the July-September period, the Office for National Statistics said
Thursday, down from the 0.5% growth posted in the second
quarter.
Investment in intellectual property as well as non-residential
buildings and infrastructure provided a positive contribution to
the overall growth figure, but was offset by a large drop in
spending on transport and computer equipment.
Separately, the ONS confirmed Thursday its preliminary estimate
of economic growth in the third quarter.
The U.K. economy expanded by 0.4% on the quarter, an annualized
rate of 1.6%. This was slightly faster compared with the first half
of the year but still significantly below the rate of growth seen
in the final quarter of 2016.
Earlier this week, the U.K. fiscal watchdog, the Office for
Budget Responsibility, slashed its five-year economic growth
forecast, citing weak consumption and sluggish business
investment.
As Britain disentangles itself from the European Union, with the
Brexit day currently scheduled for March 29, 2019, the U.K. economy
is expected to slow gradually, the OBR's figures showed
Wednesday.
Economic growth is projected to decline from last year's annual
1.8% to just 1.3% in 2019 and 2020, only accelerating to 1.5% in
2021.
Growth in business investment is expected to flatline around
2.3-2.4% annually until 2022, the watchdog's latest projections
showed, significantly below the OBR's previous forecast.
The projected growth in business investment is weaker than what
would be typical at this stage of the economic cycle, the OBR
said.
Business investment is likely to be dampened by uncertainty
regarding the U.K.'s new relationship with the EU and its future
trading arrangements with other countries.
"Uncertainty of this sort generally makes firms wary of engaging
in larger investment projects, which might prove difficult or
expensive to reverse if outcomes disappoint," the OBR said.
The slowdown in Britain's economic growth comes amid a visible
pickup in growth in other major European economies.
Write to Wiktor Szary at Wiktor.Szary@wsj.com and Jason Douglas
at Jason.Douglas@wsj.com
(END) Dow Jones Newswires
November 23, 2017 04:54 ET (09:54 GMT)
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