As UK growth slows to 0.4 per cent in the first quarter, is George Osborne right to blame it on the EU referendum?

If the referendum is so bad for UK growth, why is the government holding it? (Source: Getty)

Scott Corfe, director at the Centre for Economics and Business Research, says Yes.

Our business survey research shows that companies have reined in capital spending plans amid all the uncertainty over Brexit. This is particularly the case for large businesses, and we are likely to see some weak investment figures in the first half of this year as businesses adopt a “wait and see” approach to the referendum. If the UK votes for Brexit, investment intentions are likely to be suppressed for at least the next couple of years, given the huge amount of uncertainty that would result. Having said that, there are many other causes of slower UK economic growth at the start of the year – referendum uncertainty is just a contributing factor. Brexit concerns do not explain the decline in output in construction and production industries, or falling retail sales volumes. The Brexit referendum also does not explain why the UK is running a huge trade deficit. The economy is seeing a general loss of momentum, and the referendum is just part of the story.

Simon French, chief economist at Panmure Gordon, says No.

UK output growth has been slowing for almost two years. Since the second quarter of 2014 when the annual GDP growth rate peaked at 3 per cent, expansion has steadily moderated to yesterday’s figure of 2.1 per cent. The recent slowdown in energy price deflation, stalling nominal wage increases and a stuttering global economy has slowed the cyclical drivers of UK growth during the last quarter, while the lagged effect of the pound’s 2014-15 appreciation continues to hamper UK exporters. While there are localised indicators of slowing momentum in the commercial real estate market, construction sector and in the rising cost of UK sovereign Credit Default Swaps, there is scant data that this has been sufficiently broad-based to impact headline GDP. The good news for the government is that the positive economic case for remaining in the EU is strong enough without the need to attribute spurious causation between the upcoming referendum and a cyclical slowdown in the UK economy.

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