A credit ratings agency says the UK economy is showing the first signs of losing momentum after the Brexit vote, citing weaker demand for credit despite record low interest rates.

The report by Standard & Poor's (S&P), released hours before the Chancellor Philip Hammond delivered his first Budget, pointed to several pieces of recent data to back up its finding.

These included weakening demand for loans among businesses and consumers - the latter being the growth engine behind the UK's economic recovery since the financial crisis.

The study said: "Looking at the recent monthly flows, net consumer credit actually slowed recently - notably in December and January - where seasonally adjusted unsecured lending to households was, at £1bn and £1.4bn, significantly lower than the £1.6bn average in the 11 months to November 2016.

"In our view, this is a sign that the consumer spending spree that almost entirely drove GDP growth in 2016 is likely to have started cooling."


Image: S&P says demand for bank loans is tailing off

It said the most recent data on retail sales volumes supported its argument - with higher prices, a consequence of the weaker pound making imports more expensive, putting shoppers off buying non-essentials.

The Chancellor's Budget included an upgrade in the forecasts for UK economic growth in 2017 after the independent Office for Budget Responsibility (OBR) trimmed its expectations at the time of the Autumn Statement last year.

Image: Christmas 2016 may have been the final splurge for consumers for a while

That downward shift largely reflected concerns about Brexit-related uncertainty but the country's performance has proved more resilient than expected.

S&P said: "Overall, we think credit supply conditions remain relatively favourable and are supporting the economy, in particular thanks to the BoE's (Bank of England's) continued very accommodative stance.

"However, these favourable conditions will not be able to completely offset the expected adverse impact of pronounced Brexit-related uncertainty and the inflation squeeze on household budgets in particular."

The agency, which has the UK's sovereign rating on 'negative watch' in the wake of the country's looming EU divorce, said the report did not constitute a rating action.