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Friday, 26 January, 2001, 11:18 GMT
UK growth slumps to two-year low
A railway station
Railways may be one reason for the slowdown
The UK economy's growth slowed sharply in the last three months of 2000.

The Office for National Statistics said gross domestic product (GDP) grew 0.3% between October and December, compared with the three previous months.

That is a dramatic slowdown, less than half of the pace tine third quarter.

Compared to the fourth quarter of 1999, GDP increased by 2.4%.

These latest figures will increase fears that the UK is already being affected by the slowdown in the US economy.


The UK economy is slowing down, this slowdown is combined with a very favourable inflation backdrop


Gerald Lyons, Standard Chartered
The slowdown was caused by a decline in growth in the service sector, the key engine of the UK economy, and a contraction in industrial production, especially in the oil and gas industries.

The recent disruption on the railways may also have temporarily contributed to the slowdown in the service sector.

Cut in interest rates

Underlying inflation, excluding mortgage interest payments, is at just 2%, well below the Bank of England's target of 2.5%.

The combined impact of these factors has again prompted speculation of a cut in interest rates next month.

"The UK economy is slowing down, this slowdown is combined with a very favourable inflation backdrop," said Gerald Lyons, an analyst at Standard Chartered.

"This suggests the Bank of England will cut interest rates probably in February by 0.25% points," he added.

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See also:

22 Jan 01 | Business
UK economy 'faces tough time'
29 Dec 00 | Business
US slowdown to affect UK economy
07 Jan 01 | UK Politics
Blair: Economy key to election
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