The British economy is on track for the weakest year outside a recession since the second world war, as political turmoil and Brexit uncertainty dragged down growth, a Guardian analysis reveals.
At the end of a turbulent year and following Boris Johnson’s election victory, surveys of business activity suggest economic growth in the final three months of 2019 has essentially stalled. The jobs market is showing signs of stress and public borrowing is steadily rising again after a decade of improvement.
The Bank of England has downgraded its forecast for gross domestic product (GDP) to grow by only 0.1% in the fourth quarter as high street spending stalled and business investment was kept on hold before the election and amid Brexit uncertainty. Economic growth for 2019 as a whole is forecast to be just 1%, the weakest expansion outside a recession for more than half a century.
It comes as Andrew Bailey prepares to replace Mark Carney as the Bank’s next governor in March, tasked with steering the economy after Britain withdraws from the EU and while it attempts to strike new trade deals with other world partners.
The Conservatives promised a “tidal wave” of business investment would return to Britain if they secured a majority and unblocked parliament to take the UK out of the EU at the end of January.
However, two former Bank interest rate-setters warned the UK economy would continue to struggle for growth as Johnson faces complex trade talks with Brussels next year. The also warned the prime minister’s decision to leave the option of no-deal Brexit on the table will hold back business investment.
Writing in the Guardian, Andrew Sentance, a former member of the Bank’s monetary policy committee (MPC), said: “A new government and a new Bank of England governor. This should be a fresh start for the UK economy. But the dark shadow of Brexit continues to overhang our economic performance and prospects.”
High street closures in 2019
Thousands of high street jobs have been lost this year as a result of high profile retail administrations and thousands more are at risk as Mothercare, Debenhams and Forever 21 prepare for closures. Here are some of the key industry names that have been affected.
Mothercare: Has 79 stores and 2,500 UK retail staff as its British arm prepares to go into administration.
Regis/Supercuts: Had 220 salons and 1,200 staff when it went into administration in October.
Bonmarché: Had 318 stores and 2,887 employees when it went into administration in October. It is still trading as it seeks a buyer.
Watt Brothers: The Scottish department chain had 11 stores and 306 employees when it went into administration in October. All the stores closed and the majority of jobs have gone.
Links of London: With 35 stores and 350 staff, the jewellery chain went into administration on 8 October but its sites are still trading.
Forever 21: Had three stores and about 290 employees in the UK when it went into administration in September. Stores are staying open in order to clear stock.
Albemarle & Bond: Suddenly shut all its 116 stores in September with the loss of about 400 jobs, even though it did not call in administrators. It sold its pledge books to rival H&T in September.
Karen Millen and Coast: Had 32 stores and 177 concessions, employing 1,100 people, when it went into administration in August. All sites were closed and the vast majority of staff made redundant after the brands were bought out by online specialist Boohoo.com.
Jack Wills: Had about 100 stores and 1,700 staff in the UK when went into administration in August. Bought by Sports Direct and 98 stores are still trading in the UK and Ireland.
Spudulike: Closed all 37 stores with the loss of about 300 jobs when it went into administration in August.
Bathstore: Had 132 stores and 529 staff when it went into administration in June. Homebase bought 44 stores saving 154 jobs and the brand now trades from 28 stores.
Select: Had 180 stores and 2,000 employees when the fashion retailer went into administration in May. In June administrators at advisory firm Quantuma carried out a CVA closing 11 stores with the loss of about 200 jobs.
Debenhams: Had 166 department stores and more than 25,000 employees when went into administration in April. No store closed immediately and the chain is now owned by its lenders but two will close before Christmas and another 20 in January when the group completes a rescue restructure expected to result in the loss of 1,200 jobs.
Pretty Green: Had 12 stores and about 170 employees when Liam Gallagher’s fashion outlet went into administration in March. All but one store and 33 concessions closed with 100 jobs lost but 67 saved as the brand was bought by JD Sports in April.
Office Outlet: All 94 stores have closed with the loss of 1,170 jobs after the stationery retailer went into administration in March.
LK Bennett: Had 41 stores and 500 employees when it went into administration in March. The brand was bought by its Chinese franchise partner, Rebecca Feng, saving 21 stores, all the group’s concessions and 325 jobs. But more than 100 jobs lost with the closure of 15 stores.
Patisserie Valerie: Had 200 cafes employing nearly 3,000 people when an accounting scandal prompted the chain to call in administrators in January. About 70 of the group’s 200 stores closed immediately with the loss of 900 jobs. About 2,000 jobs were saved when about 100 Patisserie Valerie cafes were rescued by Causeway Capital, more than 20 of which have since closed. 21 Philpotts sandwich shops were bought by AF Blakemore & Son. and four Baker & Spice cafes a were bought by the Department of Coffee & Social Affairs. Sarah Butler
To gauge the impact of Brexit on a monthly basis, the Guardian monitors eight economic indicators, along with the value of the pound and the performance of the FTSE 100.
City economists made forecasts for seven of those barometers before the data was released and in four cases the outcome was worse than expected, while in three cases it was better.
The pound has rallied strongly and stock markets have surged in recent weeks amid hopes that Johnson’s new government, with an 80-seat majority, can make progress towards smoothly extracting Britain from the EU. There are also hopes for stronger economic growth spurred by a splurge in government spending.
The FTSE 100 has raced ahead since the election on the back of the unexpectedly large Tory majority and amid signs of a breakthrough in the US-China trade war – a dispute that has dragged down global trade volumes and harmed economic growth around the world this year.
However, the UK economy appears to have suffered in the run-up to the election. Employment growth relied on public sector job creation, as business across the private sector shed workers and wage growth slowed.
The Resolution Foundation warned that weak growth in 2020 would be consistent with falling employment levels. Torsten Bell, chief executive of the thinktank, said: “2019 was a bad year for the economy, which looks set to have recorded its weakest GDP growth outside of recessions since the war.”
According to surveys of business activity compiled by IHS Markit and the Chartered Institute of Procurement and Supply, the snap winter election depressed companies’ activity levels in November. Suggesting the economy stalled in the fourth quarter, Britain’s dominant services sector – which accounts for about 80% of the economy – failed to grow for the third month in a row. Manufacturing and construction activity also dropped.
Economists said Johnson’s election victory could provide companies with greater clarity required to boost activity levels, supporting stronger economic growth, but warned that lingering uncertainty over a trade deal with the EU would continue to hold back growth in 2020.
Writing in the Guardian, David Blanchflower, a former member of the Bank’s MPC, said: “Foreign firms and even some British firms will find it more attractive for many years to take whatever investment money they have to Germany, the Netherlands, Denmark or Sweden – which all look like safer havens than the UK.”
“Firms continue to stockpile as insurance against possible disruption from a disorderly Brexit. None of this is good for UK growth.”
