/UK faces pressure over Brexit stance as economy dips

UK faces pressure over Brexit stance as economy dips

A screen shows the value of the Pound Sterling against the U.S. Dollar | Daniel Sorabji/AFP via Getty Images

Statistics show the country is on the edge of a recession.

By

8/9/19, 1:50 PM CET

Updated 8/9/19, 2:10 PM CET

LONDON — The British government faces fresh pressure to contain the economic fallout of a possible no-deal Brexit after statistics Friday showed the country on the edge of a recession.

The U.K. economy contracted by 0.2 percent from April through June, its first quarterly decline since 2012, the Office for National Statistics said. Economists typically define a recession as two retractions in a row.

Chancellor of the Exchequer Sajid Javid played down the figures in a statement, pointing to “growth slowing in many countries.” He restated government policy that the U.K. would leave the EU at the end of October with an agreement or not.

But analysts said not all of the trend was down to trade tensions and more general weakness across the region.

“Today’s negative growth figures reflect a combination of Brexit uncertainty and global economic slowdown, with both challenges set to persist over the near term,” said Matthew Whittaker, deputy chief executive at the Resolution Foundation, a think tank. “That doesn’t mean we’re necessarily heading for recession, but the risk is certainly heightened right now.”

Capital Economics said in a note, “The U.K. should avoid a recession … unless there’s a no deal Brexit.”

The statistics pointed to weak manufacturing coupled with an end to Brexit-related stockpiling, which outweighed otherwise strong consumer demand. The services subsector was the sole growth area, gaining 0.1 percent.

Elizabeth Martins, HSBC economist, said that “the global story thus far has largely affected the manufacturing sector, not the service sector. So, for the latter to be looking so weak in the U.K. is worrying.”

“Whatever happens on October 31, the government needs to give business leaders a significant shot in the arm to return investment and productivity growth to the country after a prolonged period of uncertainty,” said Tej Parikh, chief economist at the Institute of Directors.

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