The UK GDP data released the other day has indicated that British economy has started slowing down with growth projections for the current year hovering around 1.7 and that for the next year around 1.5 per cent.

The slow down is said to have been started with the construction industry entering stagnation followed by a serious dip in the demand for household items, electronics, white goods etc.

Government spending and exports which pulled up the growth rate in the fourth quarter to 0.6 compared to the 0.7 per cent in the third quarter are said not likely to hold in the coming months with the former expected to be scaled down to bring under control fiscal deficit which has shot through the budgetary limits in the current year and the latter undergoing a reversal due to recession in the economies of major trading partners.

“And with higher interest rates, record debt burdens and the credit crunch all likely to put further downward pressure on investment and household spending, growth is likely to slow sharply from here,” said Paul Dales of Capital Economics, a UK based research house.

At one level, however, the economic slow down is being seen as a blessing in disguise as it is expected to dampen the inflationary tendencies that have emerged in recent months. And the Monetary Policy Committee (MPC) of the Bank of England perhaps encouraged by the fact that the country was not facing stagflation would consider a further cut in the interest rate when it meets next.

Meanwhile, the Confederation of British Industry (CBI) has published a Distributive Trades Survey conducted in February which has suggested that in the coming months retail sales would slow down considerably under the burden of negative forces of high interest rates, record debt burdens, sluggish income growth and a slowing housing market.

The fall in the reported sales balance from +4 in January to -3 is said to be consistent with a drop in the annual growth rate of official sales from 5.6 to about 2.5 per cent. This would require a monthly fall in sales by over one per cent.

The drop in the quarterly optimism sales balance from -1 in November to -9 suggests that retailers have detected an underlying weakening in demand. The survey also found that times are particularly tough for retailers of household goods, furniture, carpets and china, whose fortunes are dependent on the increasingly fragile housing market.

Also, the business investment figures revealed that the weaker property market is starting to take its toll on the wider economy. A 10.4 per cent q/q drop in construction investment contributed to the 0.5 per cent outright fall in business investment in Q4. With agricultural investment also falling and services investment rising by just 0.1 per cent, manufacturing firms appear to be the only ones confident enough or able, to invest.

And as they say misfortunes come in pairs and threesomes, as if the news of economic slow down was not enough reports have appeared just on the eve of the announcement of next year’s budget, that a proposed measure to earn projected revenue income of about £650 million may not after all materialise.

Those to be affected by this measure have warned the Chancellor of the Exchequer that the contemplated charge of £30,000 on each non domiciled resident living in Britain for seven years would cause a massive exodus of many Indian and Pakistani businessmen from the UK.

This, they said would not only cause the Exchequer a loss of more than the revenue income it is anticipating from the new charge but it would also make the UK lose its attraction as a haven for foreign investors.

In a letter to the Chancellor the UK wing of The Indus Entrepreneurs (TiE) has suggested: Increasing to 10 years the seven-year cut-off point after which time the proposed £30,000 fee would apply; making the £30,000 charge payable per family rather than per individual; specifically excluding gains made by offshore trusts in respect of investments in non-UK assets so long as these are not remitted to the UK; making gains on UK assets held by offshore trusts assessable only if the settler and/or beneficiary enjoy use in the UK of the assets in question; extending the 90-day rule to 120 days.

TiE UK, a body representing more than 1,000 entrepreneurs and executives from India and Pakistan has warned the chancellor that his proposals put at risk the jobs of thousands of British people employed by businesses owned by “non-doms” from the subcontinent.

The letter reproduced by the Financial Times on Wednesday says the changes still planned on capital gains tax would be particularly resented by non-doms with substantial wealth held overseas. It also calls on the chancellor to delay implementation of any changes for a year after they are agreed, to let those affected adjust their tax affairs.

According to the FT, entrepreneurs of Indian and Pakistani origin have built substantial businesses in the UK since they began arriving in numbers 50 years ago. Not all of them claim non-dom status, but most retain links with their countries of origin.

Indian companies have also been acquiring British businesses as part of growing business links between the UK and India. Tata, the Indian conglomerate, re-cently bought Corus, the company that absorbed British Steel, and is in negotiations to buy Jaguar and Land Rover from Ford.The FT quoting prominent Indian business leaders in the UK said they believed many thousands will leave if the changes go ahead as planned. They are also angry at the short notice that has left them little time to decide what to do.

“We have to make changes by April 5, but we still don’t know the details,” said one who asked not to be named. “We have a choice where to live, and Britain will lose what we already contribute in consumption taxes, national insurance etc.”

Meanwhile, tax avoiders and evaders in the UK seem rather put off by the disclsoure on Monday that the British HM Revenue & Customs was investigating Liechtenstein account holders using information from an insider. HMRC said it expected to recover about £100m in unpaid taxes.