Global and international uncertainty has seen UK GDP growth slow to 0.4 per cent in the first quarter, compared to 0.6 per cent in Q4 2015.
Preliminary figures released by the Office of National Statistics revealed contractions in both industrial production and construction output, while services output growth slowed but was still 0.6 per cent quarter on quarter.
Year-on-year GDP growth was stable at 2.1 per cent.
Research firm IHS Global predicts GDP growth will slow again to 0.3 per cent in Q2 in the lead up to the EU referendum vote, but to improve in the second half of the year and into 2017 if the UK votes to remain a member.
However, GDP could drop to 1 per cent in 2017 if the UK electorate votes for Brexit, compared to 2.5 per cent if it chooses to remain.
Total GDP growth for 2016 is forecast for 1.9 per cent should Britain vote to remain, compared to no more than 1.5 per cent if it chooses to leave, IHS Global stated.
IHS Global said it was doubtful the Bank of England would move to cut rates in light of the weak GDP figures, pointing to Mark Carney’s previous warning that the monetary policy committee will be reacting more cautiously to such figures in the lead up to the Brexit vote.
It said it did not expect interest rates to rise to 0.75 per cent until May 2017.
Rain Newton-Smith, CBI director of economics said the weakening was in line with their expectations.
“Looking ahead, favourable tailwinds should deliver a reasonable rate of growth. Crucially, consumer spending – which accounts for around two thirds of the economy – is expected to hold up as low oil prices and decent household income growth reinforce spending,” Newton-Smith said.
“However, there are risks that could knock growth off course. Global growth could slow further, hitting already weak exports and offsetting the boost from the falling pound. There is also a risk that concerns about debt positions in China and emerging markets could flare up again, leading to a return of financial market volatility.”