Investment by businesses in Britain fell at its sharpest rate in nearly six years in the last quarter of 2014, hit by lower investment in the petroleum sector as global oil prices fell.
As estimated in a preliminary reading, British gross domestic product between October and December grew by a quarterly 0.5 per cent, slowing from 0.7 per cent in the third quarter, the Office for National Statistics said yesterday.
That was the slowest quarterly growth rate in a year.
In year-on-year terms, growth was 2.7 per cent, also unchanged from last month’s preliminary estimate by the ONS.
Business investment fell by 1.4 per cent in the fourth quarter from the previous three-month period after 1.2 per cent fall in the third quarter.
“Given the recent steep fall in oil prices, it might be expected that investment by the oil extraction industry might also fall, as oil production becomes less profitable,” the ONS said in a news release.
The quarterly fall in investment was the biggest drop since the second quarter of 2009 and contrasted with a forecast for an increase of 1.9 per cent in a Reuters poll.
Economists have said business investment in Britain might also be affected by uncertainty over the outcome of Britain’s national elections in May.
The Bank of England forecast earlier this month that Britain’s economy will grow by 2.9 per cent this year – its fastest growth in nearly a decade – as the plunge in oil prices puts more money in the pockets of consumers and businesses.
Household spending, which accounts for nearly two-thirds of Britain’s economic expenditure, grew a quarterly 0.5 per cent in the October-December period, slowing from 0.7 per cent in the third quarter.
Spending by households in yearly terms rose 2.2 per cent, its fastest pace since early 2008, before the financial crisis began to hit Britain’s economy.
Britain’s dominant services industry remained the big driver of growth, rising 0.8 per cent in the quarter and 3.3 per cent in yearly terms, its strongest year-on-year growth since the end of 2007.
Industrial output rose 0.1 per cent, revised up from an original estimate that the sector contracted slightly in the quarter due to weak power generation. But construction shrank by more than first thought.
Net trade gave a boost to GDP too, contributing 0.6 percentage points to the quarterly growth rate, a rare encouraging sign for Britain’s attempts to rely less on domestic demand.
The slowdown in growth at the end of last year has not prevented Prime Minister David Cameron from putting the economy front and centre in the campaigning by his Conservative Party ahead of national elections on May 7.
Britain’s economic growth of 2.6 per cent in 2014 as a whole was the fastest in seven years.
Private sector readings of the economy in the first two months of 2015 suggest the year got off to a strong start.
Britain’s economic output is now 3.4 per cent bigger than its previous peak before the financial crisis in early 2008 and is about eight per cent bigger than at the time of the last election in May 2010.