Stockpiling boosted UK economy ahead of initial Brexit date
LONDON (AP) — The British economy expanded by a solid quarterly rate of 0.5% in the first three months of the year as firms geared up for the long-anticipated Brexit date. However, that boon is set to diminish in coming months and growth is expected to ease as the country hurtles toward its next Brexit date.
Much of the growth reported Friday by the Office for National Statistics appears to have been due to firms stockpiling raw materials and products ahead of Britain’s scheduled departure from the EU on March 29, a deadline that’s since been extended to Oct. 31.
Overall growth, which was in line with most predictions, was up from 0.2% in the previous quarter and slightly ahead of the 0.4% tick recorded by the 19-country eurozone.
Britain’s Treasury chief, Philip Hammond, made no direct reference about the impact of Brexit stockpiling, describing the growth rebound as evidence the economy “remains robust.”
“The economy has grown for nine consecutive years, debt is falling, employment is at a record high and wages are rising at their fastest pace in over a decade,” he said.
The manufacturing figures clearly show there was an impact from stockpiling. Output expanded by a hefty 2.2% during the quarter, a sign that both British and European businesses were doing what they could to prepare for the possibility that Britain might crash out of the EU without a deal leading to new future trading relations. There is evidence, including from the Bank of England, that executives were planning for the prospect of a “no-deal” Brexit that would have led to tariffs on many goods and disruption at ports.
“The pick-up in quarter-on-quarter growth primarily reflects a fleeting boost from Brexit preparations,” said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics.
The statistics agency did not provide details of the stockpiling boom but did acknowledge that it occurred. It found widespread strength across the majority of manufacturing industries, with the most notable growth occurring in the volatile pharmaceuticals sector, which increased by 9.4%. That was largely due to a pick-up in exports as well as some preparations in anticipation of Brexit.
Elsewhere, the British economy was muted during the quarter. The services sector, which makes up around 80 percent of the economy, saw quarterly growth ease to 0.3% in the first quarter from 0.5% in the previous one despite solid retail sales. And while construction output recovered to post a 1% increase from the previous quarter’s 0.5% decline, most economists think the sector will likely tread water for a while as Brexit uncertainty lingers.
Growth is expected to moderate in the second quarter as firms ease their stockpiling. Business investment is widely anticipated to remain weak until clarity over Brexit emerges — the prospect of a “no-deal” Brexit has just been delayed into October. The uncertainty helps explain why the British economy shrank by a monthly rate of 0.1% in March.
“While it might seem encouraging to see economic growth pick up at the start of the year, this was at least in part due to stockpiling ahead of the recent Brexit deadlines, which is likely to fade away,” Alpesh Paleja, the Confederation of British Industry’s principal economist.
“Business surveys were already painting a more subdued picture of growth over the first quarter and have made a weak start to the spring.”
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