UK economic growth is slowing and consumption has weakened significantly, accompanied by a worsening housing market and financial conditions, according to Moody’s.
In its latest Brexit Monitor report to clients, the rating agency noted: “While UK economic growth has decelerated in recent months and construction activity is sluggish, PMI surveys signal a slight improvement in sentiment from low levels."
Colin Ellis, Chief Credit Officer (EMEA) at Moody’s and co-author of the Brexit Monitor, said: "If no deal is reached between the UK and the European Union, the UK economy could face significant and permanent damage."
Although production has contracted, the UK's large services sector has contributed to growth, driven by professional and technical activities. However, consumption indicators have significantly deteriorated against historical averages and consumer confidence, in particular, has worsened compared with levels seen before the Brexit referendum in 2016.
Moody’s also said business investment and investment intentions in the UK fell substantially in the second half of 2018, with even more pronounced declines in the last months of the year. The UK's headline inflation rate has stabilised close to the Bank of England's target.
Employment intentions in both manufacturing and services remained weak toward the end of 2018 compared to earlier months. Housing market indicators are trending below five-year averages and the number of approved mortgages for house purchase has fallen markedly in recent months.
Stock market performance weakened in December and overall financial conditions deteriorated towards the end of the year.
