UK GDP grew by 0.6% in the fourth quarter of last year, up from a previous estimate of 0.5%, according to figures released by the ONS. The UK’s worsening current account, however, increased uncertainty about the sustainability of the economic recovery and the UK’s economic prospects should it opt to leave the EU (1).
The updated growth figures mean that the UK grew by 2.3% in 2015, against the previously estimated 2.2%. Analysts had expected the revised figures to remain unchanged. The results show that the UK economy is continuing to be driven by consumers, with the service sector growing by 0.8% whilst industrial output fell by 0.4%. Economists surveyed by Bloomberg forecast economic growth to decelerate to 2% for 2016 (2).
The current account deficit rose to £32.7bn in the fourth quarter, 7% of GDP, against estimates of £21.1bn. For the full year 2015 the current account deficit was £96.2bn, 5% of GDP, the highest level since records began in 1948 (1).
British Chancellor, George Osborne highlighted that, given the UK’s reliance on inward investment, “Today’s figures expose the real danger of economic uncertainty and shows that now is precisely not the time to put our economic security at risk by leaving the EU” (3).
Howard Archer, chief economist at IHS Global Insight, described the fourth-quarter current account figures as “truly horrible” and “a particularly uncomfortable development for the UK economy”.
“While the markets have so far taken a relatively relaxed view of the UK’s elevated current account deficits, it could become an increasing problem if the markets lose confidence in the UK economy for any reason – especially given the size of the fourth-quarter 2015 shortfall” (4).