UK growth forecast cut to 1.1% as GDP flatlines

IMF has left its forecast for UK growth in 2019 at 1.5% but has lowered its growth rate for this year from 1.3% to 1.1% due to Brexit uncertainty.

The IMF's data also shows that the UK's public finances are among the weakest in the world, with only Portugal's net worth in a poorer position.

Ben Brettell, senior economist at Hargreaves Lansdown, said: "Month-on-month output was flat for August, showing the economy could be losing momentum as we move into the autumn.

"The ONS update follows a cut in the IMF’s forecast for UK growth, now expected to be 1.1% this year as against a previous estimate of 1.3%. The IMF also warned that the UK’s public finances were among the weakest in the world – it used a balance-sheet approach to show the UK government has a negative net worth of more than £2tn.

"Overall though the picture is still one of muddling through. Strong growth over the summer is likely to reassure policymakers that the recent interest rate rise was warranted, but they’ll be hoping to see the momentum maintained as Brexit approaches. Markets are still pencilling in a further rise around the middle of next year – though clearly a disorderly Brexit would pose a significant risk to that outlook."

Jacob Deppe, head of trading at online trading platform, Infinox, commented: “The flat August growth figure will be a shot across the bows for the Government as we enter the home straight of Brexit. After the IMF downgrade, it’s a double body blow for those leading the Brexit negotiations.

“The economy hasn’t given up the fight but it’s by no means firing on all cylinders. It’s somewhere in between and that will add to the uncertainty surrounding our exit from the EU.

“Optimists will see the August flatline as mere seasonal fall-out, cynics will see it as symbolic of a deeper malaise. What few will deny is that the disproportionate contribution of the services sector leaves the UK very exposed in the event of a fractious Brexit.

“If consumers sit tight, the rate of growth could quickly contract, all the more so if the Pound weakens further and drives up inflation. We are in for a fraught fourth quarter.”