Services-led growth leaves UK economy vulnerable

28th January 2016 By: Ranko Berich

GDP figures – 28/1/16

The UK economy may not be falling to pieces, but it is no longer experiencing the kind of rapid growth that we were previously seeing. The question now is just how long will this slowdown continue, and to what extent will wages and inflation be affected.

This lukewarm growth should surprise no-one. External demand is very weak due to slow global conditions, and fiscal policy continues to be exceedingly tight as the government pursues aggressive spending cuts. Add those two things together and it’s going to be very hard indeed for the economy to maintain growth rates much above 2%.

The services sector was effectively responsible for the entirety of growth in Q4, leaving the economy in a precarious position. If this critical sector splutters, the UK slowdown could very quickly become a grinding halt.