Pre-Brexit rush by manufacturers boosts UK economy in first quarter

LONDON – 10 May 2019: Britain’s economy got a sharp one-off boost in the first three months of 2019, official figures showed on Friday, as manufacturers rushed to deliver orders before a Brexit that never came.

Gross domestic product grew at a quarterly rate of 0.5 percent in the first quarter of 2019, in line with the reading expected by the Bank of England, as well as by private-sector economists in a Reuters poll.

Year-on-year GDP growth picked up to 1.8 percent in early 2019 from 1.4 percent in the last three months of 2018, Britain’s Office for National Statistics said. This was its highest since the third quarter of 2017 and again in line with economists’ forecasts.

“Manufacturers were clearing their order books before March 29,” an ONS statistician said, referring to the date when Britain had been due to leave the European Union.

“That’s been the driver for the last few months,” he added.

Previous private-sector business surveys had shown manufacturers reported building up stocks of goods in case the country left without a transition deal, which they feared could cause chaos at Britain’s borders.

However, the ONS said it had seen more limited evidence of this. Stock-building had added 0.7 percentage points to GDP growth during the first quarter, but some sectors - such as motor trades, wholesalers and warehouses reported relatively little evidence of this.

Net trade took a record 2.2 percent off the quarterly rate of GDP growth, as businesses sucked in imports.

In the event, with just days to go before Britain was due to leave, Prime Minister Theresa May asked the EU for more time to negotiate a deal. Brexit has now been delayed until Oct. 31 unless there is an early agreement.

Last week BoE Governor Mark Carney said he expected growth to slow to 0.2 percent during the current quarter as the one-off boost from stock-building fades and businesses continue to hold off from investment as economic uncertainty lingers.

However, Friday’s ONS data unexpectedly showed a return to growth for business investment in the first three months of the year, after contracting for every quarter of 2018.

Britain’s economy has slowed since June 2016’s vote to leave the EU, with annual growth rates dropping from more than 2 percent before the referendum to expand by 1.4 percent last year.

The euro zone’s economy expanded by 0.4 percent in the three months to March, rebounding from a patch of sluggish growth in the second half of 2018 caused by global trade tensions and regulatory problems for the auto industry.