UK Economy Could Be Pushed Into A Recession Very Soon

The services sector of the United Kingdom has been pushed down more than expected because of the Brexit uncertainty and this could lead the country’s economy to be pushed into a recession which would be the first since the global economic crisis of 2007-08, said analysts and experts.

Data published by IHS Markit in its Purchasing Managers Index on Wednesday showed that there has been a completed stalling of growth in the services sector last month in the UK. And added to this are similar surveys that have indicated that manufacturing and construction industries of the country are also in deep slowdown. Markit said that when all such surveys and data are compiled, they simply indicate that there would be shirking of 0.1 per cent of the UK economy in the third quarter.

In the three months through June, there has been a drop of 0.2 per cent in output already which means that such an outcome would technically mean that the economy had been pushed into a recession even before it actually leaves the European Union which is scheduled for the end of next month.

“Business activity in the service sector almost stalled in August as Brexit-related worries escalated, curbing spending by both businesses and consumers.” said Chris Williamson, chief business economist at Markit. “The lack of any meaningful growth in the service sector raises the likelihood that the U.K. economy is slipping into recession.”

And if the UK government led by Boris Johnson finally takes the UK out of the EU without a deal, it could result in the stronger blow to the economy. Coupled with the concerns of a no-deal Brexit are concerns of a snap national election in the country, resulting in a fall in the currency below $1.20 on Tuesday which is the lowest for the currency since early 2017.

The Markit’s index for the services sector touched lower than 50.6 in August while the consensus value of the index according to economists was at 51. On the other hand, business optimism touched its lowest point since after the Brexit referendum of 2016 while the growth in input price inflation was the highest since January.

According to the OECD Chief Economist Laurence Boone, the economic situation in the UK is particularly “tense because of the uncertainty created by Brexit”

“Since Brexit negotiations started, investment growth has been zero, a flat line. That’s a reflection of the uncertainty around the world,” Boone added.

Boone said that the EU would not be affected to t same extent as the UK by Brexit and added that funds to support those countries and sectors such as agriculture and electronics that would be affected by Brexit is already p[resent with the EU.

The worst down turn since 2012 is being faced by the manufacturing sector of the UK, showed similar reports earlier this week. And in August, there was contraction in the construction industry for the fourth straight month.

(Adapted from Bloomberg.com)

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Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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