Britain’s struggling economy returned to reverse gear in August, raising fresh City fears about the impact of a no-deal Brexit next month.
The nation’s GDP shrank by 0.1 per cent in the month after a surprisingly strong July when it surged by 0.4 per cent. The renewed downturn was mainly due to a big fall in manufacturing output.
The latest slip came as business leaders pleaded with the Prime Minister to “stay at the table” and not to “flinch” from making compromises ahead of a critical EU summit in a week’s time.
The Institute of Directors revealed that investment by big firms has slumped to a record low since the referendum. “Investment has been bottled up by uncertainty, and this is taking its toll on the prosperity of the country as a whole,” policy director Edwin Morgan told the Standard.
“The UK and EU must spare no effort in seeking a deal and neither side should flinch at compromise,” he appealed.
The Confederation of British Industry said companies were “struggling with uncertainty” that undermined investment and productivity. “Business has an unequivocal message for both sides,” said deputy DG Josh Hardie. “Put all your energy into compromise. Stay at the table and get a deal.
“If people’s jobs and prosperity are put at the centre of discussions, the tone can change and a deal can be done.”
Despite today’s drop in GDP, City analysts said Britain is almost certain to avoid recession — defined as two consecutive quarters of negative growth — ahead of the scheduled Brexit date at the end of October.
However, they warned that September could see another fall in output meaning that Britain could be heading into a traumatic break with Brussels with the economy flatlining. Samuel Fuller, director of trading education platform Financial Markets Online, said: “With the UK still rushing headlong towards a no-deal Brexit and the respected IFS think tank now warning that a chaotic exit would decimate the Government’s finances as well as hit the economy, today’s modest economic progress is very much the calm before the storm.”
Howard Archer, chief economic advisor at forecasters the EY ITEM Club, said: “The economy looks to have had a very challenging and difficult September.”
