UK Flirting With Recession as Economy Runs at Near-Decade Low Amid Brexit
The British economy avoided falling into recession in the third quarter of the year, but annual growth is running at a near-decade low rate as a result of ongoing uncertainty related to Britain’s departure from the European Union and a subdued global backdrop, official figures showed Monday.
The Office for National Statistics said Monday that the economy grew by a quarterly rate of 0.3%. That increase was solely due to a firm pick-up in July, as August and September showed monthly declines.
Following the 0.2% contraction in the second quarter, there had been fears that the British economy would fall into recession — commonly defined as two consecutive quarters of negative growth.
Though a recession was avoided largely because of resilient household spending and higher government spending, the British economy remains relatively weak, largely because of uncertainty related to Brexit, which is particularly impacting on business investment. On an annual basis, the British economy was only 1% bigger in the third quarter, its weakest year-on-year growth since the first quarter of 2010, when Britain was emerging from a deep recession in the aftermath of the global financial crisis.
With the global economy slowing and Brexit uncertainty still prevalent in the run-up to Britain’s general election on Dec. 12, few economists anticipate any marked improvement in the British economic outlook in the fourth quarter or even next year.
“The slowdown highlights the pains of political uncertainties linked to Brexit and the upcoming general election,” said Kallum Pickering, senior economist at Berenberg Bank.
And it’s by no means clear that the election will provide clarity over Brexit. More political gridlock could emerge.
Prime Minister Boris Johnson hopes his Conservative Party can muster a majority to push through his withdrawal agreement to facilitate an orderly British exit from the European Union at the end of January, Britain’s new scheduled departure date. He says “getting Brexit done” will unleash pent-up investment.
Britain’s Treasury chief Sajid Javid said in a tweet that the return to growth was “another welcome sign fundamentals of U.K. economy are strong.”
That view was derided by his counterpart in the main opposition Labour Party, John McDonnell. “The fact that the Government will be celebrating 0.1% growth in the last six months is a sign of how low their hopes and expectations for our economy are,” he said.
On Brexit, Labour wants to renegotiate Johnson’s deal to ensure closer ties and then put it to the people in another referendum, with an option to remain in the EU. Most of the other opposition parties are opposed to Brexit.
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