The UK economy almost stalled in the first quarter of this year growing by just 0.1 per cent, the Office for National Statistics reported on Friday.

This was down from the 0.4 per cent expansion registered in the final quarter of 2017 and well below the 0.3 per cent City analysts had expected.

It was also the weakest quarterly growth rate since 2012, while GDP per head actually fell by 0.1 per cent.

Economists said that the Beast from the East was partially responsible for the disappointing figures but also identified underlying signs of weakness among households, stemming from the squeeze on incomes due to the slump in sterling in 2016 and also trepidation from businesses ahead of Brexit next year.

The pound slumped in the wake of the data, dropping to $1.3819, down 0.7 per cent on the day, as traders scrambled to bet against a May interest rate rise from the Bank of England due to the unexpected weakness of GDP.

The Bank had pencilled in a 0.3 per cent GDP expansion for Q1 in its most recent Inflation Report in February.

“The downside surprise in Q1’s GDP figures is probably the final nail in the coffin for the chance of an interest rate hike in May,” said Mark Hollingsworth of Capital Economics.

The UK was hit by severe bad weather in February and March. The ONS said that snow disruption had hit retail sales and construction, but could not explain all the fall in growth.

Weakest since 2012

The agency reported that services, which account for 80 per cent of the economy, grew by 0.3 per cent in the three months to March, a slowdown from the 0.4 per cent rate in the previous quarter.

However, it estimates that construction output, around 6 per cent of output, slumped by a massive 3.3 per cent.

Manufacturing, around a tenth of the economy, eked out growth of 0.2 per cent, well down on the 1 per cent plus growth rates recorded by the sector in the second half of 2017.

The UK’s annual rate of growth in Q1 dropped to just 1.2 per cent, down from 1.4 per cent previously, and the weakest since the second quarter of 2012.

The Chancellor sought to emphasise the progress the economy has made over the past eight years.

“Our economy has grown every year since 2010 and is set to keep growing,” said Philip Hammond. “Unemployment is at a 40-year low, and wages are increasing as we build a stronger, fairer economy that works for everyone,” he said.

However, the UK’s growth rate has been diverging from those of the US and the EU over the past year as the global economy has picked up.

“The UK remains firmly in the slow lane of global growth and these figures indicate a further loss of momentum in early 2018,” said John Hawksworth of PwC.

The ONS estimate is only preliminary, based on incomplete survey data. Previous first estimates have been heavily revised. And some analysts said they expected growth, in any case, to pick up in the second quarter, supported by receding inflation and rising nominal wages.