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UK Economy Slows Ahead Of Scotland Referendum

James Boston
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UK Economy Slows Ahead Of Scotland Referendum

The UK’s Conference Board has just released it’s pervasive Leading Economic Index for the month of July. This appears to record a slowing in upward trend of economic activity with the latest figure expanding by just 0.1% on the month, this is in comparison to expansion of 0.6% the previous month. Additionally, the Construction Output numbers from the UK slowed somewhat in the month of July. On a seasonally adjusted basis the 0% growth recorded reflects a fall from the June month on month expansion of 1.2%, consensus estimates for growth of 0.6% were missed. This dragged the year on year figure to a lower 2.6% from the 5.3% recorded in June, consensus here was for a reading closer to 3.2% growth.

July is seldom a growth month in terms of construction, but there are a few additional short-term factors weighing on an otherwise strong economy. Firstly, with specific regard to the construction sector, the Bank of England has displayed a determination to reduce the excessive growth in house prices in certain regions of the economy, new regulatory restrictions are due to come into force which are designed to limit transactions at the higher end of the market. These, if unsuccessful, will no doubt be followed up with further broader measures which will be targeted at dampening housing demand, the Banks measures are serving to create a level of uncertainty within the construction industry which in turn is limiting investment.

Secondly, the impending Scottish independence referendum in six days time is creating a distraction from the business of economic growth. The outcome of this referendum, which once looked like certain rejection, is now in serious doubt. The economic implications of a passing of this vote for both Scotland and more particularly the remainder of the UK will be significant, this is leading to a postponement of many investment decisions which in turn is proving to be a drag on the economy.

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