UK business investment falls ahead of EU referendum

Thu May 26, 2016 5:48am EDT
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By Ana Nicolaci da Costa and William Schomberg

LONDON (Reuters) - Business investment in Britain fell in early 2016, a sign that uncertainty caused by the country's impending referendum on European Union membership is weighing on companies.

Growth in the economy slowed to 0.4 percent in the January-March period, the Office for National Statistics confirmed on Thursday, and many economists said it might lose further momentum in the second quarter.

Business investment fell in annual terms for the first time in three years, depressed by weaker spending on offices and other non-residential buildings. Weak trade figures again dragged on growth, leaving consumers as the economy's drivers.

The services sector, which makes up 80 percent of the UK economy, showed signs of losing steam.

The Bank of England has previously said uncertainty hanging over the June 23 referendum was crimping investment, especially in the commercial real estate sector where transactions dropped 40 percent in the first quarter of this year.

Chris Hare, an economist with Investec, said the figures might suggest that a lot of the economic slowdown derives from concerns around the referendum, something which could lift quickly if the country votes to stay in the 28-nation EU.

"But the downside risk is that more of the slowdown relates to underlying weakness," Hare said.

The ONS said the economy grew by 2.0 percent versus a year ago, below expectations that the data would confirm an initial estimate of 2.1 percent annual growth in the first quarter.   Continued...

Workers are seen in office windows in the financial district of Canary Wharf in London November 3, 2015. REUTERS/Kevin Coombs