LONDON: Britain'seconomy unexpectedly shrank in the second quarter of the year on Brexitturmoil, official data showed Friday, placing the country on the verge ofrecession and sending the pound tumbling to a 2.5-year low. Gross domesticproduct (GDP) fell 0.2 percent in the April-June period, the first time theeconomy has contracted in almost seven years, the Office for NationalStatistics (ONS) said in a statement, blaming a dramatic slump in the constructionand manufacturing sectors.
The data, whichwas worse than market expectations for zero growth and also reflects globaleconomic strains, sent the pound diving to $1.2056 -- the lowest level sinceearly 2017. Another contraction in thecurrent third quarter would put Britain in an official recession, ahead of thenation's expected withdrawal from the EU at the end of October.
Brexit paralysis?
"The latestdata reveal an economy in decline and skirting with recession as headwinds fromslower global economic growth are exacerbated by Brexit-relatedparalysis," said IHS Markit economist Chris Williamson. The resultcontrasted with 0.5-percent expansion in the first quarter, when activity wasboosted by companies stockpiling ahead of Brexit.
Output was buoyedin the first three months of 2019 because Britain had initially been scheduledto leave the European Union at the end of March. "GDP contracted in thesecond quarter for the first time since 2012 after robust growth in the firstquarter," said Rob Kent Smith, ONS head of GDP.
"Manufacturingoutput fell back after a strong start to the year, with production broughtforward ahead of the UK's original departure date from the EU.
"Theconstruction sector also weakened after a buoyant beginning to the year, whilethe often-dominant service sector delivered virtually no growth at all,"he added. British Prime Minister Boris Johnson replaced Theresa May in Julyafter winning the governing Conservatives' leadership contest on a pledge totake Britain out of the bloc on October 31 with or without a divorce deal.
BrexiteerJohnson, a pivotal 'Leave' campaigner in the 2016 EU exit referendum, hasrepeatedly insisted that Britain can make an economic success of Brexit. Newfinance minister Sajid Javid on Friday said that the global economy wasslowing, but highlighted other recent positive data for the UK.
"This is achallenging period across the global economy, with growth slowing in manycountries," said Javid. "But the fundamentals of the British economyare strong-wages are growing, employment is at a record high and we're forecastto grow faster than Germany, Italy and Japan this year," he added."The government is determined to provide certainty to people andbusinesses on Brexit-that's why we are clear that the UK is leaving the EU on31 October."
'Pretty grim'
The government'sofficial forecaster last month warned that Britain would slide into a year-longrecession should it leave the EU without a deal. Bank of England governor MarkCarney recently warned that a no-deal Brexit could undermine entire sectors ofthe economy such as the car industry and farming. "The latest look at theUK economy makes for pretty grim viewing," XTB analyst David Cheetham saidin reference to Friday's data.
"Given thegrowing threat of a no-deal Brexit that looms menacingly overhead, it would notbe at all surprising if the current quarter also shows a contraction-thereforemeeting the standard definition of a recession." Johnson's predecessor Maystepped down last month after failing to get her EU-divorce deal throughparliament and being forced to delay Brexit twice. - AFP