UK suffers World Cup hangover

The economy stalled in August after a strong July.



Azad Zangana
Senior European Economist and Strategist

The Office for National Statistics (ONS) reported that the UK economy grew by 0.7% in the three months to August compared to the previous three months. This was slightly better than the Thomson Reuters consensus of 0.6% growth.

The figures show a strong rebound from the start of the year, when heavy storms disrupted travel, construction and logistics.

However, the details of the latest set of figures are less promising for the near future. Monthly growth in August fell to zero compared to a strong 0.4% expansion in July. It seems that the World Cup may have encouraged spending during July, but the party ended abruptly the following month.

This is supported by the latest retail sales figures which show the volume of sales slowing from 0.9% month-on-month in July to just 0.3% in August.


Weaker growth for every sector in August

Within the details of the report, every major sector saw some deterioration in growth in August. Growth in services activity was flat in August, down from 0.3% in July, while construction output contracted by 0.7% compared to 0.5% growth previously. The production sector in aggregate grew by 0.2% (down from 0.4%), but the manufacturing subsector contracted by 0.2% (previously flat).

Are Brexit fears weighing on growth?

Overall, the headline GDP figures mask some underlying weakness. On a quarterly basis, even if GDP stalls again in September, growth for the third quarter would be 0.6%, which would be the best quarter of growth since the end of 2016. However, it would mean potentially a weak end to the year.

In our last look at the expenditure breakdown of GDP, we found that final sales were actually in recession, as final demand had not kept up with output, meaning that the economy was building inventories. The lack of growth in August may be in response to this. Then again, it could also be in response to the rise in fear over a no-deal or cliff-edge Brexit following the announcement of the government’s Brexit proposals, dubbed Chequers.

If the slowdown is Brexit-related, then it is likely to have persisted through September, and could potentially last for a few more months yet.

Schroder Investment Management Limited - Dubai Branch is a DIFC Foreign Recognised Company. The DIFC Branch is duly authorized and regulated by the Dubai Financial Services Authority. The content of this material is not intended nor is it to be considered as financial advice and is only for the purpose of knowledge. This material has not been approved by any regulator/authority in the Middle East region. Accordingly, no regulator/authority has approved this information material or any other associated documents nor taken any steps to verify the information set out in this material and has no responsibility for it.


We have made every effort to ensure the accuracy of the information in this document. However, we cannot be held responsible for any errors, mistakes, or omissions, or for any actions taken based on this information. If you do not fully comprehend the content of this document, we recommend seeking advice from an authorized financial advisor.

This research and the information contained herein may not be reproduced, distributed, or transmitted in DIFC or in any other jurisdiction to any other person or incorporated in any way into another document or other material without our prior written consent.


Azad Zangana
Senior European Economist and Strategist


Follow us

Issued by Schroder Investment Management Limited. Authorised and regulated by the Financial Conduct Authority.

For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security / sector / country.

© Copyright 2018  Schroder Investment Management (Europe) S.A. All rights in all countries.

Schroder Investment Management Limited – (Dubai Branch) is regulated by the Dubai Financial Services Authority (“DFSA”)