Economic growth in the UK is expected to have fallen by half in the opening months of the year, one of Britain’s leading forecasting bodies has said, amid renewed concerns for the health of the economy.

The National Institute for Economic and Social Research (NIESR) said growth was set to fall to 0.2% in the first quarter of 2018 from 0.4% in the final three months of last year, when the economy enjoyed a mini-recovery despite an overall slowdown in 2017 triggered by the Brexit vote.

Amit Kara, head of UK macroeconomic forecasting at the thinktank, said the main reason for the weakness was severe weather in March, dubbed the “beast from the east” in the media, which was likely to have disrupted activity in all major sectors of the economy.

The estimate, which comes ahead of official figures from the Office for National Statistics later this month, followed news that Britain’s factories recorded a surprise fall in production in February, in the first drop in activity in the sector for almost a year.

Confirming fears of a slowdown in the UK economy so far this year, figures from the ONS showed manufacturing output declined by 0.2% in February, falling well behind economists’ expectations for growth of 0.2%.

There was also a sharp drop in construction output, suggesting continued pain for the industry amid the fallout from the collapse of Carillion. Monthly output unexpectedly fell by 1.6% in February, as builders were hit by the snow at the end of the month.

Factories producing machinery such as turbines, pumps, compressors and agricultural toolsrecorded the sharpest falls in February, the worst month for the manufacturing sector since March last year.

Ruth Gregory, UK economist at the consultancy Capital Economics, said: “Manufacturing growth appears to have come off the boil.”

However, the ONS said there was no evidence that heavy snowfall in February had a negative impact on output, which will likely stoke fears for the health of Britain’s factories – which have generally performed better than much of the economy in the last year.

Overall industrial production, which includes mining, quarrying and energy, rose by 0.1% compared with the previous month. Energy supply provided the biggest contribution, rising by 3.7%, helped by the cold weather.

The figures provide a snapshot of the economy just before there was further snowfall in early March, meaning there could be worse news to come from manufacturers.



There had been signs of the weakness for the economy earlier this year from company surveys, which showed falling activity compared with the final months of 2017.



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However, there was better news for Britain’s trade deficit – the difference between imports and exports – which shrank more than expected to £10.2bn in February from £12.2bn in January.

Ian Stewart, chief economist at Deloitte, said there were still positive signs for the British manufacturing sector, with demand for goods helped by the strength of the world economy and a weak pound. “If we can’t do well in terms of manufacturing output in conditions like that then we’ve got problems,” he said.

NIESR said lacklustre initial readings for the economy can often be revised higher by the ONS, as officials continue to receive fresh data after they pronouncing their first assessment for growth. When extreme cold weather led to GDP falling by 0.5% in the final quarter of 2010, the figures were later revised to show growth of 0.1%.

Economists said the Bank of England was likely to press ahead with raising interest rates from as early as next month, despite the apparent weakness for the economy in the first quarter.

Lee Hopley, chief economist at EEF, a manufacturing lobby group, said: “The data looks more like a temporary wobble than a turn for the worse. While other indicators may have softened since the start of the year, ongoing growth in the global economy should continue to spur growth across manufacturing in the coming quarters.”