The pound fell on Thursday after UK growth was revised lower by the Office for National Statistics in its second estimate of fourth-quarter gross domestic product (GDP).
GDP in the final three months of 2017 increased by 0.4% quarter-on-quarter, driven by business and financial services growth. This was revised down from the preliminary reading of 0.5% growth as estimated output from the production industries was scaled back.
While growth in business and financial services drove growth in 2017, accounting for about 80% of national income, the services sectors experience their slowest pace of growth since 2011, the ONS said.
Construction was the worst-performing sector, with output estimated to have decreased by 0.7% in the fourth quarter. However, this was revised up from an earlier estimate of a 1% decrease.
Quarterly growth and levels of GDP for the UK
Slowdown to persist
Chris Williamson at IHS Markit said: "The economy grew less than previously thought in the final three months of 2017, and a further slowdown looks likely at the start of 2018."
"Survey evidence indicates that investment and construction are being subdued by heightened business uncertainty, generally linked to Brexit, while consumer spending is being hit by high inflation."
Jacob Deppe at Infinox agreed: "This downward revision to fourth quarter GDP confirms that Britain’s economy ended 2017 with a whimper rather than a bang.
“To make matters worse, it’s becoming clear that the slowing momentum experienced at the tail end of last year has dragged into the start of 2018.
"January’s weak retail sales figures, and the news that factory orders fell to a four-month low, all point towards continued weakness in the UK economy."
Investors were more interested, however, in what the data implied for the Bank of England's monetary policy. Data on Wednesday showed underlying wage growth had raised expectations of an interest rate hike, possibly as soon as May.
The downward revision to fourth-quarter growth appeared to dent rate expectations, however, as the pound fell.
Samuel Tombs at Pantheon Macroeconomics said: "The latest GDP data suggest that the economy remains in a fragile state and does not need to be cooled with another rate rise as soon as May."
The pound weakened against most of its rivals, down 0.17% to $1.3894 versus the dollar. The euro meanwhile, rose 0.22% to £0.8845.