UK economic growth slows in first quarter, ONS reveals

UK economic growth slowed to 0.4% in the first quarter of 2016, its weakest pace since the end of 2012, the Office for National Statistics revealed on Wednesday.

The first quarter rise in gross domestic product was in line with expectations and compared with a 0.6% increase in the final three months of 2015.

On an annual basis, first quarter GDP climbed 2.1%, in line with the previous quarter's growth but above the 2.0% that was forecast.

The slowdown reflected weaker growth in services activity and a decline in industrial and construction production.

Services expanded 0.6% in the first three months of the year, easing from 0.8% in the fourth quarter. Industrial production contracted for a second consecutive quarter, falling 0.4% due to a slump in manufacturing activity. Construction output dropped 0.9%.

The Bank of England has warned that growth could slow further in the second quarter amid uncertainty leading up to the 23 June referendum on Britain's membership in the European Union.

"Today’s data does nothing to quell those fears," said Dennis de Jong, managing director of UFX.com.

"Poor retail sales combined with sluggish wage growth and a contraction in industrial output paint a fairly gloomy picture for the British economy over the next couple of months until the crucial vote on 23 June."

CMC Markets chief market analyst, Michael Hewson, on the other hand, said the slowdown in GDP is not necessarily a result of uncertainty over the EU referendum.

He said the slowdown seen in manufacturing and construction is "pretty much mirrored elsewhere in the global economy, so even with the June referendum and any uncertainty around that, these sectors would likely have struggled anyway".

"Furthermore global growth is also showing signs of weakness in general, so to argue that uncertainty over the forthcoming 'Brexit' vote is likely to be the sole cause of any slowdown would have been stretching the facts a little," he added.