Brexit harms the British economy

Brexit uncertainty dragged U.K. investment to its worst slump since the financial crash a decade ago, leaving the economy with barely any momentum.

Gross domestic product increased a smaller-than-forecast 0.2 percent in the fourth quarter, while December alone saw the economy shrink by 0.4 percent, the most since before the 2016 vote to leave the European Union. The pound fell 0.4 percent to $1.2897 as of 10:36 a.m. in London.

The slowdown came as businesses cut investment for a fourth consecutive quarter, the longest continuous decline since 2008-2009.

The economy is facing the worst year for growth since the credit crisis, with economists warning of a recession if Britain leaves the EU without a deal to smooth the transition. The BOE sees growth of 0.2 percent this quarter, but the sudden loss of momentum at the end to 2018 suggests the economy could stagnate, as indicated in recent purchasing manager surveys.

The trade deficit narrowed to 12.1 billion pounds in value terms in December. But the gap excluding oil and erratic items widened amid a fall in exports. Growth in 2018 slowed to 1.4 percent, and the BOE sees a further moderation this year to 1.2 percent.

U.K. Economy Wilts as Brexit Jitters Hit Business Investment, Bloomberg, Feb 11