Britain's GDP sees first contraction in Q2 since 2012

Pound falls in wake of GDP release

Pound falls in wake of GDP release

Nancy Curtin, a Chief Investment Officer at Close Brothers Asset Management, said: "There's no denying that the UK's GDP figures are a cause for concern".

Traders in currency markets appeared to reflect that concern, sending the pound down across the board, including to another 2½-year low against the dollar of $1.2065.

The Bank of England, in its August inflation report last week, predicted that growth would be limited in the current quarter to 0.3 percent, and that growth for the year as a whole would drop to 1.3 percent.

Analysts had forecast growth to be flat.

The surprising result comes as the United Kingdom economy has endured "particularly volatile" conditions so far in 2019, the Office for National Statistics says, in which businesses struggled first to adapt to the country's planned exit from the European Union in the spring - and then adjusted to new uncertainties as that deadline was extended through October. Delaying an election until after Brexit could be a tactic to ensure that happens even if parliament withdraws support for his government.

The decline was partly attributed to a decline in vehicle production (as summer shutdowns for planned maintenance were brought forward to April in anticipation of a March Brexit date) and a slowdown in stockpiling. But above all, what is holding the economy back is the continuing uncertainty over Brexit.

Alpesh Paleja, CBI lead economist, said: "It's clear from our business surveys that underlying momentum remains lukewarm, choked by a combination of slower global growth and Brexit uncertainty".

In a trading update, the online holiday firm said that a fall in the value of sterling over the summer as fears of a no-deal Brexit intensified had forced it to raise prices, which had, in turn, made it "difficult" to gain market share while also maintaining its margins.

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That has stoked fears that Britain will leave the European Union without a deal, which would see tariffs and other restrictions imposed on traded goods.

Many investors say a no-deal Brexit would send shock waves through the world economy, tip Britain into a recession, roil financial markets and weaken London's position as the pre-eminent global financial centre.

But the figures appear to confirm dire predictions about Brexit.

But the Chancellor, Sajid Javid, told Channel 4 News he wasn't expecting any such thing.

"The government is determined to provide certainty to people and businesses on Brexit", said Javid.

Data released from Germany on Friday showed that exports fell 8pc in the 12 months to June per cent from the same month in 2018, likely putting Europe's largest economy on track to show an economic contraction when its gross domestic product numbers are released next week.

"Two weeks into Boris Johnson's hard Brexit government and we are now officially halfway towards a recession", Labour MP David Lammy tweeted.

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