Economy & Business Snapshot

Summary

Economic growth in the UK regained some momentum at the end of last year. The UK economy expanded by 0.5% in the final quarter of 2015, up from 0.4% in the previous quarter. However, for the first time since 2013 annual growth was less than 2%. This slowdown perhaps paints a more accurate picture of the underlying trend in GDP growth.

Output growth in the South East was faster in December than in the previous month but economic growth slowed in the UK according to the latest business survey Lloyds TSB/Markit.

Economic growth in the UK in the final quarter of the year was again driven solely by the service sector (up 0.7% in Q4 2015, from 0.6% in the previous quarter), with small negative contributions from production and construction. The good news for this part of the South East is found in the strong expansion of the business services & finance and distribution, transport & catering sectors.

Agriculture expanded but construction fell into a technical recession. The fall in industrial production was the largest quarterly decrease in three years. Output growth in this sector was affected by the recent fall in oil prices weighting on oil and gas extraction, mild weather affecting the electricity and gas supply sector and appreciation of the pound over the previous 18 months, alongside weaker global demand affecting the manufacturing sector.

The sub-national quarterly growth estimates are not available but the survey-based evidence for the South East points to a growth in Gross Value Added (GVA) of around 0.6% in Q4 2015. Output growth in the South East was faster in December than in the previous month but the UK output growth slowed according to the PMI data.

The labour market in the UK and the South East continued to improve in the three months to November. Jobs growth was strong but the picture below the headline data was not as strong as reported last month.

Sub-regional estimates of GVA growth are not available but the latest independent estimates from the Royal Bank of Scotland (RBS) point to robust growth in the area in the second quarter of 2015. Annual GVA growth in Oxfordshire Surrey, Hampshire and West Sussex was faster than the UK and the South East average in the second quarter but marginally slower than in the first quarter.

Hampshire County Council Area was the third fastest growing sub-regional economy in the South East in Q2 2015 but GVA growth was marginally slower than in Q1 2015. According to RBS GVA growth in Hampshire in Q2 2015 was 3.3%, marginally slower than the annual growth in the first quarter (3.6%).

The economy of Oxfordshire was around 3.1% larger in Q2 2015 than in Q2 2014. GVA growth in Oxfordshire was slower than in Q1 2015 but GVA growth in the first half of the year was less volatile than in most other sub-regional economies in the South East.

The economy of Surrey was about 2.8% larger in the second quarter of 2015 than at the same time in the previous year. Economic growth in Surrey was marginally slower than in the first quarter (3.1%), similar to Buckinghamshire and faster than the South East or UK average.

Given the strong concentration of business & financial services and distribution, hotels & catering in the area it is likely that economic growth in Oxfordshire, Surrey, Hampshire and West Sussex was faster than the UK average in Q4 2015.

The broad picture points to a slowing economy which remains dependent on services. The loss of momentum in December is linked to a deteriorating business optimism which in turn is linked to weak overseas growth and the financial markets volatility. The latest data and developments abroad have further reduced the chances of a near-term rate rise in the UK.