Brexit drives UK towards recession as economy shrinks

The historical building of the Bank of England, London, UK
The UK’s economy shrank by 0.2 per cent in the second quarter (Picture: Getty Images)

The UK’s economy has shrunk in the second quarter this year, the Office for National Statistics (ONS) has said.

Gross domestic product (GDP) unexpectedly fell by 0.2 per cent, following a 0.5 per cent advance in the previous three months.

It’s the first time the British economy has shrank in the second quarter since 2012.

The economy had experienced a ‘pre-Brexit boost’ in early 2019, with many companies stockpiling for the UK to leave the European Union on March 29.

But as the deadline was moved back, firms began to run down their built up inventories and stock levels fell by £4.4 billion, knocking the GDP percentage.

The authors of a respected economic survey are predicting the UK economy contracted in the second quarter of the year, raising fears of a potential recession ahead. According to an all-sector calculation, following the final IHS Markit/CIPS purchasing managers' index (PMI) reading for June, the economy will have recorded negative growth of 0.1% between April and June.
It’s the first time the British economy has shrank in the second quarter since 2012 (Picture: Science Photo Library)

Car and motor factories also brought forward their summer maintenance shutdowns to April in a bid to avoid disruptions around the original Brexit date.

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In the next three months, manufacturing shrank by 2.3 per cent – the most it has done since 2009.

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ONS statistician Rob Kent Smith said: ‘Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK’s original departure date from the EU.’

Business investment contracted 0.5 per cent in the second quarter of the year, when economists’ had expected a fall of a 0.3% fall.

Household spending, which had been doing better than business investment, rose 0.5 per cent on the quarter, compared to 0.6 per cent in the first quarter.

Prime Minister Boris Johnson at Downing Street in London welcomes Estonian Prime Minister Juri Rata ahead of talks. PRESS ASSOCIATION Photo. Picture date: Tuesday August 6, 2019. See PA story POLITICS Estonia. Photo credit should read: Dominic Lipinski/PA Wire
Boris Johnson is committed to leaving the EU with or without a deal (Picture: PA)

The outlook for 2019 remains uncertain, with new Prime Minister Boris Johnson committed to leaving the EU on October 31, with or without a deal.

Last week, the Bank of England predicted growth for the year as a whole will drop to 1.3 per cent.

Britain’s economy has slowed since June 2016 referendum, with annual growth rates dropping from more than 2 per cent before the vote, to expand by 1.4 per cent last year.

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