The British economy shrinks for the first time in seven years | Economic news

By Sharon Marris, Business Journalist

The UK economy is on the brink of a possible recession after a contraction of 0.2% in the second quarter.

This is the first time that the country's GDP – the measure of economic expansion – has been shrinking since late 2012.

Sky News economic editor Ed Conway said the result was "worse than expected" and comes after "relatively strong growth" of 0.5% in the first quarter of this year.

"Any economist who looks at this issue will say that it's a big disappointment," he said.

Among the main points:

• Manufacturing output fell 2.3%, the largest decline since a calendar quarter since 2009
• The large services sector has grown but at the lowest rate since the beginning of 2016.
• Business investment, historically low since the Brexit vote of June 2016, further declined in the second quarter, contracting by 0.5%.

Despite this, Chancellor Sajid Javid said that the fundamentals of the British economy were "strong".

He cited IMF figures that the UK is expected to grow faster than Germany, Italy and Japan this year.

Conway said: "Global growth is stuttering, and we could see a contraction in other major European economies.

"There are also other effects – the Brexit and Brexit preparations have a big impact on these numbers.

"There were a lot of stocks in the first quarter and a lot of factory closures in the second quarter and that is perhaps what contributed to that number."

If the third quarter shows a negative result, the resulting recession would be the first since the financial crisis and the 2008-09 recession.

But it will not be clear whether the UK managed to avoid a recession before the start of November – after the October 31 deadline for the UK to leave the European Union.

The pound sterling fell against the euro and the US dollar in GDP news.

David Cheetham, chief market badyst at XTB, said: "Given the growing threat of a Brexit without threatening threat agreement, it would not be surprising at all that the current quarter also shows a contraction – thus meeting the standard definition of a recession with consecutive declines in quarterly GDP ".

Nancy Curtin, chief investment officer of Close Brothers Asset Management, said there was "no doubt that the UK was struggling".

"The service and automotive sectors have slowed down, the construction and manufacturing sectors have retreated and business activity has stagnated." The impact of Brexit is undoubtedly exacerbated by the more global slowdown. "

Chris Williamson, chief economist at IHS Markit, said: "With the slowdown in global economic growth and increased uncertainty around Brexit, the UK economy is expected to struggle in the coming months. .

"It is possible that we expect stronger growth through Brexit planning without agreement as October 31 approaches, but headwinds in the wider economic environment mean that such an increase will probably be too short. "

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