Face of Nation : The British economy shrank unexpectedly for the first time since 2012 in the second quarter, dragged down by a slump in manufacturing just as Prime Minister Boris Johnson prepares to leave the European Union with or without a divorce deal.
In the most startling economic warning sign since the 2016 Brexit referendum, the gross domestic product fell at a quarterly rate of 0.2% in the three months to June, below all forecasts in a Reuters poll that had pointed to a flat reading.
Sterling fell to the day’s low of $1.2088 after the GDP data was published, down 0.4% on the day, before recovering slightly. Against the euro, the pound also fell and was last down 0.3%, not far from a two-year low.
Year-on-year economic growth slid to 1.2% from 1.8% in the first quarter, Britain’s Office for National Statistics said, its weakest since the start of 2018. Annual growth in June alone was the weakest since August 2013 at 1.0%.
“The economy is stalling,” PwC senior economist Mike Jakeman said. He said the Brexit crisis and the uncertain global outlook left Britain’s economy on a “knife-edge” for the third quarter. Many car 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. “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,” ONS statistician Rob Kent-Smith said.
