UK steps towards recession as economy contracts for first time since 2012

The UK economy declined by 0.2 per cent between April and June, its worst recorded performance since 2012, according to data published by the Office for National Statistics (ONS).

The decline comes after economic growth of 0.5 per cent was reported in the first three months of 2019 and has pushed the UK a step closer towards recession, which occurs when an economy contracts in two consecutive quarters.

The is the first contraction since the fourth quarter of 2012 and it had not been forecast by economists, who had instead predicted it would stagnate, with the consensus forecast for 0 per cent growth.

The pound slipped after the data had been released, further raising fears of a recession. The currency has been at two-year lows on Brexit uncertainty and fell 0.2 per cent to $1.2106.

In the quarter, manufacturing output fell by 2.3 per cent, the biggest calendar quarter fall since 2009. Although the services sector grew, it was the weakest rate since early 2016 at just 0.1 per cent and business investment, which has been weak since the 2016 Brexit Referendum, faltered further in the second quarter, contracting 0.5 per cent.

Despite the figures published by the ONS, speaking to Sky News, Chancellor Sajid Javid claimed the fundamentals of the UK economy are “strong”, adding that International Monetary Fund (IMF) figures forecast the UK will grow faster than Germany, Italy and Japan this year.

Commenting, Trade Union Congress (TUC) general secretary Frances O’Grady claimed that Prime Minister Boris Johnson’s “toxic threat” of a no-deal Brexit damages economic confidence, adding: “No responsible leader would contemplate inflicting such a crisis on the nation.

“The government should protect us from the current dangers by taking no-deal off the table and giving our economy urgent support through investment in public services.”

Sanlam UK chief investment officer Phil Smeaton added: “Despite all the fears around a no deal Brexit, the UK economy has held up relatively well, and although todays reading shows a mild short term slowdown, economic growth has chugged along nicely since the vote over three years ago.

“Any risk of a recession in the UK more likely stems from the ongoing global economic slowdown and trade war, factors external to the UK and beyond its control. Uncertainty and overhyped fears from the establishment have depressed Sterling to oversold levels, boosting the UK’s competitive position as the hard working people of this great nation offer their services to the world at fire sale prices.

“David Ricardo, a UK economist, first popularised the benefits of free trade and whatever the outcome on Halloween, the UK will remain open for business and willing to cut a fair deal with anyone seeking honest and free trade.”

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