The British economy registered its slowest growth since 2012, and 0.3% lower than anticipated, when it grew by only 0.2% in the last quarter of 2018, according to Officer for National Statistics (ONS).
Those numbers reflected the first time that construction, car manufacturing, and services all saw a drop.
Overall growth in 2018 was at only 1.4%, down from 1.8% in 2017. The growth forecast from the Bank of England for 2019 is 1,2%, the lowest since 2009 when the economy was in recession.
Growth is expected to remain low over the first half of 2019, with a chance that Britain could slip into a recession by the summer.
Part of the British economic downturn follows a global slowdown that has affected China, the EU, and the United States. The Resolution Foundation think-tank notes that real household disposable income was 4.1% lower at the end of 2018 than official forecasts had predicted before the UK’s 2016 referendum on EU membership.
An IFS report published on February 11 suggests that the UK must expect continued austerity for at least two years. A hard Brexit could cost the UK’s budget £50 billion in additional borrowing over the next 15 years if the government goes ahead with a plan to impose import duties, which would make everyday consumer goods more expensive.
UK Prime Minister Theresa May and Chancellor Philip Hammond announced in October the end of a decade of austerity. At the moment, maintaining spending at current levels as a share of GDP would require £11 billion in additional spending, maintaining expenditures at current levels in absolute numbers an additional £2.2 billion over the four years, or an extra £5 billion to sustain per capita spending.
The opposition sets the bar somewhere in the middle. Shadow Chancellor John McDonnell said that unless the government commits to spending another £5 billion there will be more cuts in government spending.
For the Eurozone, Brexit will also come with losses, but also with benefits. Amsterdam has seen at least 30 companies relocate, according to Amsterdam’s Deputy Mayor, Udo Kock. Dublin, Paris, and Frankfurt have also offered refuge to companies bracing for Brexit-related chaos at ports.
Frankfurt attracts banks, Dublin legal services and insurance, Paris picked up the European Banking Authority, Amsterdam takes asset management, trading, and the European Medicines Agency.
The flight of businesses from the UK is expected to continue with pharmaceuticals and, perhaps, educational institutions. In this dire economic environment, there is little the government can to stimulate the economy, as interest rates stand at barely 0.5%.