UK Economy Hit By ‘Dramatic’ Fall In Car Output

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Mini Production

A “dramatic” fall in car production and an easing of stockpiling by manufacturers meant the economy shrank in April, official figures show.

The economy contracted 0.4% from the month before, according to the Office for National Statistics (ONS).

The contraction meant growth for the three months to April slowed to 0.3%.

Factory shutdowns designed to cope with disruption from a March Brexit slashed UK car production in April by nearly half, the industry said last month.

BMW’s Mini factory in Oxford brought forward its summer maintenance shutdown to April to minimise any disruption surrounding Brexit. Other manufacturers’ annual stoppages were also brought forward.

‘Hangover’

The economy had seen a spurt of growth in the run-up to the proposed March date for the UK leaving the European Union, as manufacturers stockpiled parts, raw materials and goods in the anticipation of holdups at the border.

After the Brexit deadline was extended to October, it suffered the reverse effects as these supply reserves were used up and fewer purchases were made.

“The hangover that’s followed the UK’s original exit date is proving stronger than anticipated, said Yael Selfin, chief economist at accountants KPMG UK.

“Today’s figures signal the UK economy is likely to experience more subdued growth for the rest of the year, marred by Brexit uncertainty.”

“There was also widespread weakness across manufacturing in April, as the boost from the early completion of orders ahead of the UK’s original EU departure date has faded.”

‘Sluggish growth’

The contraction in April was far sharper than economists had expected.

Ruth Gregory, senior UK economist at Capital Economics, said the figures suggest “underlying growth is pretty sluggish”.

“With the Brexit paralysis and a slowing global economy taking its toll, we doubt GDP will grow by much more than 1.5% or so in 2019 as a whole and expect interest rates to remain on hold until the middle of next year.”

But it has said a no-deal Brexit will make the declines worse, with the threat of border delays, production stoppages and additional costs.

The Prime Minister’s official spokesman said: “While monthly figures are always changeable, the fundamentals of our economy are strong and it has grown every year since 2010. Employment levels are at a record high and wages growing in real terms.”