UK GDP slows far more than expected in the first quarter

Economic activity in Britain slowed far more than economists had been anticipating at the start of the year, according to a preliminary estimate from the Office for National Statistics (ONS).

Gross domestic product (GDP) expanded at a quarter-on-quarter pace of 0.3% in the three months ended in March, after an expansion of 0.6% in the last quarter of 2014. Economists had pencilled in a gain of 0.5%.

The performance, which was held back by a marked contraction in construction output, was the worst since the fourth quarter of 2012.

But in comparison to a year ago GDP was 2.4% higher.

Activity in the services sector grew by 0.5% quarter-on-quarter while output from the other three main industrial groupings within the economy decreased, by 1.6% in construction, 0.1% in production and 0.2% in agriculture.

Economists said the figures were bad news for the governing coalition but the slowdown is likely to just be temporary.

Howard Archer of IHS Global Insight said the print was a "jolt" for the Conservative and Liberal Democrat parties ahead of the general election in nine days but that they can still point to still relatively decent growth in the quarter and take positives from the granular detail within the numbers.

He added: "The fundamentals look particularly promising for consumer spending and it is seen growing by around 3.0% in 2015. UK export prospects should also be increasingly helped over the coming months by stronger growth in the Eurozone, although sterling’s strength against the euro threatens to limit the upside."

Chris Williamson of Markit said the figures most likely overstated recent economic weakness, but that the slowdown "highlights major concerns that linger over the health of the UK economy and will inevitably result in economic forecasts being revised down".

Tuesday's GDP numbers are a preliminary reading, he noted, so must be read with caution. "It is based on only partial information for the quarter, and in particular a lack of hard data for March" - a month in which surveys indicated an upturn in the pace of growth.

Based on evidence of such surveys and the strongest expected growth of household real incomes since 2006, Vicky Redwood of Capital Economics said she doubted the recovery was on the cusp of a sustained slowdown.

"Indeed, Q1’s figure could eventually be revised up to these sorts of rates (although obviously not in time to help the incumbent government). We still think that the economy will grow by close to 3% this year as a whole."

Vicky Redwood