U.K. Business Investment Weakened in Third Quarter

By Wiktor Szary and Jason Douglas Features Dow Jones Newswires

U.K. business investment softened visibly in the third quarter of this year, new figures showed, a sign that uncertainty linked to Brexit and Britain's future trading arrangements is giving companies pause.

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U.K. businesses' capital spending grew by a quarterly 0.2% in the July-September period, the Office for National Statistics said Thursday, down from the 0.5% growth posted in the second quarter.

Investment in intellectual property as well as non-residential buildings and infrastructure provided a positive contribution to the overall growth figure, but was offset by a large drop in spending on transport and computer equipment.

Separately, the ONS confirmed Thursday its preliminary estimate of economic growth in the third quarter.

The U.K. economy expanded by 0.4% on the quarter, an annualized rate of 1.6%. This was slightly faster compared with the first half of the year but still significantly below the rate of growth seen in the final quarter of 2016.

Earlier this week, the U.K. fiscal watchdog, the Office for Budget Responsibility, slashed its five-year economic growth forecast, citing weak consumption and sluggish business investment.

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As Britain disentangles itself from the European Union, with the Brexit day currently scheduled for March 29, 2019, the U.K. economy is expected to slow gradually, the OBR's figures showed Wednesday.

Economic growth is projected to decline from last year's annual 1.8% to just 1.3% in 2019 and 2020, only accelerating to 1.5% in 2021.

Growth in business investment is expected to flatline around 2.3-2.4% annually until 2022, the watchdog's latest projections showed, significantly below the OBR's previous forecast.

The projected growth in business investment is weaker than what would be typical at this stage of the economic cycle, the OBR said.

Business investment is likely to be dampened by uncertainty regarding the U.K.'s new relationship with the EU and its future trading arrangements with other countries.

"Uncertainty of this sort generally makes firms wary of engaging in larger investment projects, which might prove difficult or expensive to reverse if outcomes disappoint," the OBR said.

The slowdown in Britain's economic growth comes amid a visible pickup in growth in other major European economies.

Write to Wiktor Szary at Wiktor.Szary@wsj.com and Jason Douglas at Jason.Douglas@wsj.com

(END) Dow Jones Newswires

November 23, 2017 04:54 ET (09:54 GMT)