UK growth has slowed to its weakest year-on-year pace since 2012 with output falling in November, official figures show, fuelling fears the economy might have stagnated or even contracted over the fourth quarter amid Brexit-driven political uncertainty.

News of a 0.3 per cent month-on-month fall in UK gross domestic product in November yesterday fuelled speculation in financial markets about the possibility of an early interest-rate cut and weighed on sterling. This is the sharpest monthly drop in output since April.

The month-on-month fall meant GDP in November was up just 0.6% on the same month of 2018 - the weakest year-on-year growth since June 2012.

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Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said: “There now looks to be a very real chance that the economy contracted marginally over the fourth quarter of 2019 - at best it may have stagnated.”

Official fourth-quarter GDP figures are due next month.

Sterling was, at 5pm in London, trading around $1.2984, down three-quarters of a cent on its pre-weekend close.

Bank of England Governor Mark Carney and fellow Monetary Policy Committee member Silvana Tenreyro fuelled speculation last week about the possibility of a cut in UK base rates from 0.75% if economic weakness persisted.

Comparing the September to November period with the preceding three months, UK GDP was up just 0.1%.

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The National Institute of Economic and Social Research think-tank estimated, after yesterday’s GDP figures from the Office for National Statistics, that the UK economy will turn out to have stagnated in the fourth quarter.

It said: “The UK economy is on course to post zero growth in the fourth quarter of 2019.”

Garry Young, director of macroeconomic modelling and forecasting at the NIESR, said: “The latest data confirm that economic growth in the United Kingdom had petered out at the end of last year.

“GDP was virtually flat in the three months to November and the latest surveys point to further stagnation in December. While there is some evidence of an improvement in business optimism following the General Election, it is doubtful that this will do much to change the short-term economic outlook of further lacklustre growth.”

UK manufacturing output plunged 1.7% month-on-month in November. Services output fell 0.3% but construction grew by 1.9%.

Mr Archer said: “The economy had a very poor November as GDP fell 0.3%. This was the largest month-on-month drop in GDP since April when the economy had been hit by de-stocking after the UK’s exit from the EU on March 31 was scrapped.”

Chris Williamson, chief business economist at IHS Markit, said: “The latest GDP data add to signs that the UK economy stagnated at best in the fourth quarter of last year as heightened political uncertainty, Brexit risks and weaker global demand all colluded to dampen spending by both business and households. The good news is that all these headwinds are showing signs of moderating, if not even turning into tail winds, as we move into 2020. However, downside risks remain elevated.”

Commenting on the interest-rate outlook, Mr Archer said: “If the Bank of England does act any time soon, it will clearly be to cut interest rates. However, despite recent increased dovish comments by MPC members, we are far from convinced the Bank will cut interest rates as we do expect the economy to see a clear pick-up in activity early on this year. We just about hold on to the view that the Bank will keep interest rates at 0.75%.”

However, he added: “We suspect that the economy will find it hard to kick on from the expected improvement in the early months of 2020 until it becomes clearer what will happen with the UK-EU relationship at the end of 2020 and the nature of the relationship thereafter.”

Mr Carney last week flagged the impact of Brexit and declared: “With the relatively limited space to cut Bank Rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response.”

Two members of the Bank’s nine-strong MPC, Michael Saunders and Jonathan Haskel, voted unsuccessfully for a quarter-point cut in base rates in November and December.