Economy

United Kingdom economy contracted in the second quarter

United Kingdom economy contracted in the second quarter”

The UK economy shrank in Q2, the first such occurrence since 2012, with commentators warning that worse could be to come as no-deal Brexit looms.

Friday's data showed business investment contracted 0.5% in the second quarter of the year versus economists' expectations of a 0.3% fall.

Opponents of Prime Minister Boris Johnson accused him "breaking the economy".

The figures will heap pressure on Boris Johnson amid fears over a No Deal Brexit.

Many analysts had only expected the United Kingdom economy to flatline at 0% in the second quarter, but several industry surveys in recent months had pointed to contraction and painted a bleak picture of the health of the United Kingdom economy. The Bank of England last week predicted that growth will only stage a limited pick-up to a quarterly rate of 0.3pc during the current quarter, and that growth for the year as a whole will drop to 1.3pc.

Labour Leader Jeremy Corbyn visits luxury vehicle maker Aston Martin.

Year-on-year economic growth slid to 1.2 percent from 1.8 percent in the first quarter, Britain's Office for National Statistics said, its weakest level since the start of 2018. "We are likely to see a similar phenomenon ahead of October, as firms look to mitigate supply chain disruption in the case of a no-deal Brexit, which may provide short-term support for GDP".

That stockpiling boon helped the economy grow by 0.5 percent in the first quarter. It was trading at 1.206 U.S. dollars by Friday lunchtime, its lowest point since early 2017.

Many vehicle factories ramped up manufacturing at the start of the year and brought forward production breaks to prepare for Britain's original Brexit date of March 29, but the divorce was delayed by then Prime Minister Theresa May.

The contraction compares to 0.5% growth in the previous quarter, when the highest quarterly pickup in manufacturing since the 1980s was recorded.

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But it also warned of a 1-in-3 chance that output in annual terms will contract in the coming quarters, even if Britain leaves the European Union on reasonable terms.

The ONS said companies had been building up additional goods in the first quarter in anticipation of a March Brexit.

"And in fact, don't take my word for it".

'And you know why they're not?

The employers' body, the CBI, said the contraction was "concerning".

"If the Treasury delays action until after 31 October, its efforts will likely prove too little too late". "Unless the chancellor steps in imminently with radical action, we could be heading for a chaotic autumn - and a very long winter", said the FSB's policy and advocacy chairman, Martin McTague.

Labour's shadow chancellor John McDonnell said the "dismal" figures were a "direct result of Tory incompetence", blaming the government's handling of Brexit and years of austerity cuts for falling business investment and stagnating productivity.

The Government will discuss plans to support companies that could struggle in the event of a no-deal Brexit.

Production output fell by 1.4 per cent, while manufacturing declined by 2.3 per cent.

The sector was also weighed down by a drop in transport equipment, which was 5.2 per cent lower due to annual vehicle factory closures being brought forward from summer to April, as companies planned for possible Brexit disruption.



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