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Weakening UK trade puts the brakes on GDP drag on growth

Weakening UK trade puts the brakes on GDP drag on growth

LONDON: The UK economy has slowed after poor overseas trade figures put a record drag on growth, leaving household spending to drive the recovery and casting further doubt on George Osborne’s hopes that strong tax receipts will help him hit ambitious budget targets.

Official figures confirming that GDP growth slipped in the third quarter came alongside a warning from a leading credit rating agency that the chancellor’s latest package of tax and spending measures left him at risk of missing his goal to run a surplus on the public finances by the end of the decade. Fitch Ratings said the chancellor was heavily reliant on economic growth holding up to balance the books.

But rival ratings agency Moody’s said the move to a slower pace of deficit reduction helped make the government’s fiscal plans “more realistic and deliverable”. At the same time, however, Moody’s remained sceptical that the chancellor would actually achieve a budget surplus by the end of the decade.

We continue to expect a small deficit by the end of the current parliament,” it said in an update to financial markets.

There was also bad news for the chancellor in the detail of the latest GDP figures which showed growth of 0.5% in the third quarter of the year, down from 0.7% in the second quarter. A breakdown of the figures showed net trade, the gap between exports and imports, took a record 1.5 percentage points off quarterly growth.