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UK business investment slumps in fourth quarter

UK business investment slumps in fourth quarter

U.K. business investment slumped to its weakest quarterly rate in three years in the fourth quarter, indicating the economic slowdown could be sharper than expected, data from the Office of National Statistics showed Tuesday.
Total business investment was estimated to have fallen 0.5 percent on the previous quarter, following a sharp drop in private sector investment in construction and other production and stagnation in services investment.
That was the weakest quarterly rate since investment fell 1.5 percent in the final quarter of 2004, not counting adjustments made for investment in the nuclear industry, the ONS said.
Business investment increased an annual 1.7 per cent on the year, the lowest annual growth rate since the third quarter of 2005 when investment grew 1.3 percent.
The data, which may reflect tougher financing conditions due to the global credit crunch, fell far short of expectations of a 0.9 percent increase on the quarter and 2.9 percent rise on the year from a Dow Jones Newswires survey of economists last week.
The figures also indicate there has been a significant drop in business investment since the July-to-September period when it rose 2.0 percent on the quarter and an upwardly revised 6.9 percent on the year.
The drop in the fourth quarter "is very disappointing and does not bode well for future growth," Howard Archer, chief U.K. and European economist at economic research firm Global Insight, said in a note.
"We suspect that softer business investment will be a significant factor causing U.K. GDP growth to slow markedly to 1.8 percent in 2008 from 3.1 percent in 2007," he said.
Total business investment fell to 35.5 billion pounds (US$69.8 billion; euro47.1 billion) in the fourth quarter from 35.7 billion in the previous three-month period.


Updated : 2021-04-17 22:45 GMT+08:00