UK growth revised down for first quarter to 0.2 per cent as consumer-facing sectors toil

 
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Retail and other consumer industries struggled at the start of the year (Source: Getty)

The British economy slowed more than previously thought at the start of the year as the performance of consumer-facing businesses worsened.

The UK's GDP grew by only 0.2 per cent in the first quarter, according to the Office for National Statistics (ONS), down from the preliminary estimate of 0.3 per cent.

A slowdown in Britain's dominant services sector, which accounts for almost four-fifths of output, was the main reason for stalling growth. Services output grew by only 0.2 per cent during the quarter, well below the four-year average of 0.7 per cent growth.

While the UK economy has expanded for 17 consecutive quarters, the start of 2017 saw the weakest growth since the first quarter of last year, when fears of a "hard landing" in the Chinese economy dented the global economy.

Since then the UK economy has recovered, accelerating at the end of last year as consumer spending remained resilient.

However, households are now spending less because of rising prices, the ONS said. Economists have predicted increased pressure on spending as the impact of a weaker sterling since the EU referendum passes through.

Household spending rose by only 0.3 per cent in the first quarter, the slowest rate of increase since the end of 2014, when expenditure fell.

Shilen Shah, a bond strategist at Investec, said: "Given the dependency of the economy on consumer spending, weak real earnings growth suggests a near-term re-acceleration is unlikely."

Despite recent gains a pound remains around 20 cents less valuable against the US dollar than its pre-referendum result peak, pushing up prices as imports become more expensive. Consumer price index inflation reached 2.7 per cent in April, with the Bank of England judging the rise was caused solely by sterling's devaluation.

Net trade dragged on the UK economy as imports rose and exports actually fell by 1.6 per cent during the quarter, despite the exchange rate theoretically making British products more attractive.

One bright spot was a pick-up in business investment levels, which rose by 0.6 per cent in the quarter after a sharp contraction at the end of 2016. Meanwhile gross fixed capital formation rose by 1.2 per cent in the quarter as spending on physical assets increased.

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