Brexit uncertainty blamed as UK economy shrinks for the first time in six years

Posted On: 
9th August 2019

Uncertainty surrounding the Brexit  timetable has been blamed after the UK economy shrunk for the first time in more than six years.

Production contracted by 1.4% in the second quarter - the largest downward contribution
Credit: 
PA Images

Figures released by the Office for National Statistics revealed that in the second quarter of 2019, GDP contracted by 0.2%.

It is the first time growth has fallen into negative figures since 2012.

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The setback came as a surprise after the economy grew by 0.5% in the first three months of the year, prompted by a rise in manufacturers stockpiling ahead of the initial 29 March Brexit deadline.

Labour said the "dismal" numbers were a result of the Prime Minister's insistence that the UK will leave the EU "do or die" on 31 October.

But the Government insisted growth was slowing around the world, and that the fundamentals of the UK economy remain strong.

Rob Kent-Smith, head of GDP at the ONS, said manufacturing output fell while the construction sector had weakened between April and June.

He 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."

A further shrinking of GDP in the third quarter of 2019 would see the UK officially fall into recession.

STAGNATING

Shadow Chancellor John McDonnell said: "The Tories’ Brexit bungling, including Boris Johnson now taking us towards no-deal, is breaking the economy.

"The Tories are responsible for tumbling business investment and stagnating productivity – and that, along with nine years of austerity, has contributed to GDP contracting today."

Liberal Democrat Treasury spokesperson, Chuka Ummuna, added: “Now we have confirmation that the Tories’ plan to crash the UK out of the EU has crashed our economy.

"Pursing a ‘no deal’ Brexit is a political choice without a mandate – these figure show people’s jobs and livelihoods are being sacrificed at the altar of political ideology."

TUC general secretary Frances O'Grady said: “The Prime Minister’s toxic threat to crash out of the EU without a deal only adds to the alarm.

"It damages confidence in the economy, putting people’s jobs at risk. No responsible leader would contemplate inflicting such a crisis on the nation."

The production sector contracted by 1.4% between April and June of this year, making it the largest downward contribution to GDP growth.

Elsewhere services sector output recorded the only positive contribution, although it slowed to 0.1%.

‘EMERGENCY BUDGET’

Campaign group the Federation of Small Businesses said the Government should call an emergency Budget ahead of the Halloween Brexit deadline or risk leaving it "too little too late". 

The group's Policy and Advocacy Chairman Martin McTague said: "Since April, small firms have not only had sustained political uncertainty to handle but also new HMRC reporting requirements, a higher National Living Wage, increases to auto-enrolment contributions and fresh business rates hikes.

"Confidence among small firms has been in the doldrums for a year now. 

"Time is of the essence. Unless the Chancellor steps in imminently with radical action, we could be heading for a chaotic autumn – and a very long winter."

Chancellor Sajid Javid said of the figures: "This is a challenging period across the global economy, with growth slowing in many countries.

"But the fundamentals of the British economy are strong – wages are growing, employment is at a record high and we’re forecast to grow faster than Germany, Italy and Japan this year.

"The government is determined to provide certainty to people and businesses on Brexit – that’s why we are clear that the UK is leaving the EU on 31 October.

Elsewhere, Labour MP and campaigner from the pro-EU group Best for Britain, Jo Stevens, said: "The economy tanking is a disaster for the UK which has been caused by Boris Johnson’s first few weeks as Prime Minister.

"His threat to force through a no-deal Brexit, despite warnings from business and against the will of the majority of people in this country is starting to come back to haunt him.

"We need to stop Brexit to stop the rot."