NIESR warns of drag on economy from weak international trade

Britain's economy expanded at a slightly lower rate over the three months to January in comparison to the previous three-month stretch, according to one of the most influential think-tanks.

The UK's gross domestic product grew by 0.4% during the reference period, down from the 0.5% clip seen over the prior three months, driven primarily by weakness in the production sector in November and December, the National Institute of Economic and Social Research said.

James Warren, NIESR Research Fellow, said: “the softening of growth in the 3 months to January was primarily driven by weakness in the production sector at the end of last year. Despite our estimates indicating a subdued start to 2016, we do expect the economy to grow by 2.3% this year, primarily driven by consumer spending.

"However, negative contributions from net trade are expected to weigh heavily on growth. There exist a number of downside risks that have the potential to exacerbate this, should they materialise,” Warren added.

Commenting on Wednesday's GDP estimate, Dennis de Jong, managing director at UFX, said: "with the UK’s GDP estimate falling, the Euro could now make fresh gains on the Pound. The figure burdens Bank of England governor Mark Carney with yet more bad news, after poor industrial production results this morning.

“It will be very interesting to see whether the figures can bounce back next quarter. It’s an uphill struggle, particularly given the FTSE’s recent freefall and volatility of emerging markets worldwide.”