Wednesday 11 March 2020 9:57 am

UK economy posted zero growth even before coronavirus

The UK economy flatlined in January, data has shown, as industrial production contracted and the services sector struggled even before coronavirus spread in Britain.

The zero growth figure was below analysts’ expectations of a 0.2 per cent expansion, and shows that the pick-up in confidence after Prime Minister Boris Johnson’s December election win failed to translate into higher output.

Read more: Coronavirus: Bank of England slashes UK interest rates to 0.25 per cent

In the three months to January the UK economy also registered zero growth as the country’s giant services sector stagnated, the Office for National Statistics (ONS) said.

ONS head of GDP Rob Kent-Smith said that in the three months to January, “growth in construction, driven by housebuilding, offset yet another decline in manufacturing, particularly the drinks, cars and machinery industries”.

“The dominant service sector also showed no growth in the latest three months with falls in retail and telecoms balanced by strength in rentals, employment and education.”

The worse-than-expected GDP reading suggests that the UK economy could be hit harder by coronavirus than initially thought.

Deutsche Bank has said it expects UK GDP to grow by just 0.5 per cent this year due to coronavirus. The zero growth figure for January heightens the chances of a recession – two quarters of contracting output – in the first half the year.

There have now been 382 infections and six deaths from the virus in the UK. The outbreak threatens the economy as people quarantine themselves, offices and factories close, and supply chains around the world are disrupted.

The Bank of England today slashed interest rates after an emergency meeting in an effort to boost confidence and encourage lending in the economy. The cut took the interest rate back to 0.25 per cent, its lowest-ever level.

Threadneedle Street’s monetary policy committee (MPC) said: “Temporary, but significant, disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies.”

Read more: Budget 2020: How Rishi Sunak will tackle coronavirus and hike spending

Chancellor Rishi Sunak is today set to unveil a number of spending measures to tackle coronavirus when he gives the first Budget since the election. He told the BBC on Sunday that the NHS would get “whatever resources it needs”.

The Office for Budget Responsibility (OBR) will today release updated forecasts for the UK economy, although the spread of coronavirus could quickly make them out of date.