Britain's economy shrank for the first time since 2012 by 0.2% fuelling a risk of a recession

Britain's economy shrank for the first time since 2012 by 0.2% fuelling a risk of a recession


THE UK economy unexpectedly shrank between April and June – it's worst performance for six and half years, according to new data.

The Office of National Statistics said it fell by 0.2 per cent due to car factory shutdowns and uncertainty due to Brexit.

It raises fears of a recession – which is when the economy shrinks for two consecutive quarters.

In May, data from the ONS showed that the economy recovered for a slight downturn that month.

On average a recession occurs every decade, they reduce living standards by £2,500 per household and raise unemployment.

In June, Brits were warned that the UK was on the 'brink of a recession' as job adverts plunged by their biggest quarterly fall in nine years.

The figures suggested that the world economy has also slowed down, largely down to a trade conflict between the United States and China.

Many economists assumed that the economy would flat line during the spring, including the Bank of England, who last week predicted that growth would rise slightly to 0.3 per cent.

As a result of the unexpected downturn, the pound fell 0.25 per cent against the dollar and 0.3 per cent against the euro.

The FTSE 100 is now also down by 0.26 per cent, while the FTSE 150 has reversed earlier gains and is trading marginally down for the day.

At the start of the year, the economy grew by 0.5 per cent ahead of the original Brexit deadline on March 29 as firms increased production to avoid disruption.

But after the original deadline was called off, firms have been using up their stockpiles before building up new reserves.

The ONS said: "The path of GDP and some of its components has been particularly volatile through the year so far, largely reflecting changes in timing of activity related to the UK's original planned exit date from the European Union in late March."

Production fell by 1.4 per cent and manufacturing declined by 2.3 per cent.

The services sector, which is usually the main driver of Britain's economic growth, had its weakest quarter for three years, climbing just 0.1 per cent, compared to 1.2 per cent the year before.

Matthew Whittaker, from the Resolution Foundation, warned that the risk of recession "certainly heightened" as issues associated with Brexit and global economic slowdown are due to persist over the coming months.

He added: "Given our work has shown that lower-income households are particularly vulnerable to any new economic downturn – with lower savings today than they had on the eve of the financial crisis – it’s imperative that the government plans its response now, rather than waiting for any further deterioration in economic conditions.

"Longer term, restoring productivity growth must remain the priority."

Chancellor Sajid Javid, who took over from Philip Hammond at the start of Boris Johnson's premiership, said that now is a "challenging period".

He added: "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 that Germany, Italy and Japan this year."

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