UK GDP flat in Q4 2019

Figures released yesterday by the Office for National Statistics (ONS) show that first estimates of UK gross domestic product (GDP) remained flat in Quarter 4 (October to December) 2019.  GDP in Quarter 4 in 2018 grew just 0.2% on Quarter 3 and so to be flat in 2019 over the same time frame, is a relative slowing. However, when we compare Q4 2019 to Q4 2018 the UK economy increased by 1.1%. Following some fluctuations in GDP growth and revisions throughout 2019 GDP was estimated to have increased by 1.4% between 2018 and 2019.

As we have mentioned before, 2019 was a turbulent year for the UK economy. Businesses faced a Brexit deadline twice in both Q1 and Q3 which undoubtedly created a displacement of activity and investment. Disruption to production with firms pulling forward plans to support stockpiling as well as in the wider manufacturing sector bringing forward factory shutdowns to try and minimise impacts of what was a potential No Deal Brexit. Add into the mix a Prime Minister’s summer resignation and a general election in the Autumn it is fair to suggest that the political uncertainty in the UK has taken its toll on business.

2019 first estimates of production output

A combination of factors will have weakened manufacturing GDP throughout the year. The headlines suggest that manufacturing output across the economy as a whole continues to suffer, falling for three consecutive quarters, and downward revisions in many areas as the year has gone on.  The Index of Production data also released by the ONS yesterday gives a more detailed picture of individual sectors’ contribution to growth or decline in recent months and a first look at the whole of 2019 and how it stacks up in comparison to previous years given the challenges.

In Q4 2019 there was a 0.8% quarterly decline in production output, predominately caused by the fall in manufacturing output. Although many industries contributed to the decline, the manufacture of transport equipment particularly suffered, but we know that this is more strongly linked to automotive manufacturing. The combined UK sector for Aerospace manufacturing, repair and maintenance achieved quarterly output growth in Q4 2019 of 0.3%.

Aerospace manufacturing returning to growth in Q4

Aerospace manufacturing experienced little to no change over the first nine months of 2019, excluding a spike in March. However, September saw the first potential indication of a return to confidence with a 0.1% increase from August 2019 in production output. This marginal monthly growth also occurred in October, then more strongly in November and December, eventually confirming growth in Q4. The return to, albeit slow, growth for aerospace manufacturing is thanks to a rise in domestic production, strong international demand remaining in place and a record widebody year that is especially positive for UK value.  Despite the encouraging improvements in Q4, a more generally turbulent 2019 means aerospace manufacturing output is 5.1% lower than the full year 2018 at first estimates.

The service, repair and maintenance side of the sector remain more volatile, 2019 output ended the year -15.3% behind 2018 full year, with Q4 also declining -2.9% on Q3 output.  The slow-to-grow side of manufacturing aerospace means the full year output for the combined aerospace sector is -10.4% behind the full year 2018.

It is now important to put uncertainty of 2019 behind us and make sure UK manufacturers are competitive and attractive to investment in future to sustain and grow our share of a growing market, and to ensure the marginal growth experienced in Q4 continues at a stronger pace into 2020.