The value of investments and any income from them can fall and you may get back less than you invested.

UK economy contracts for first time since 2012

Share

Download market review and economic roundup PDF

The UK economy shrank in the second quarter of 2019, raising fears of a recession and representing the UK’s worst quarterly performance since 2012.

Data from the Office for National Statistics (ONS) showed that output fell by 0.2% between April and June, down from growth of 0.5% in the previous quarter, when stockpiling ahead of the original Brexit deadline boosted growth. Although the key services sector expanded, the growth was more than offset by a 1.4% fall in manufacturing output. The result was worse than forecast by the Bank of England, which was expecting zero growth in the second quarter. The pound tumbled by 0.4% against the dollar on the news, and is now trading back below $1.21 level.

The news comes at the end of a tumultuous week for the global economy. Trade war tensions pushed the US and China to the brink of escalating their trade dispute on Monday after China allowed its currency, the renminbi (RMB), to fall below the key exchange rate of 7 RMB per US dollar – although by the end of the week the currency had stabilised above this point.

President Trump labelled China a “currency manipulator” in an angry tweet on Monday – a devaluation in the RMB currency takes the sting out of the tariffs he has imposed on Chinese goods. However, Trump stopped short of any further retaliation which suggests he knows that a further escalation will cost the US dear in terms of falls in equity markets – something he is desperate to avoid. With no end in sight to trade tensions and central banks in New Zealand, India, Thailand and the Philippines all cutting rates this week, analysts now predict another US rate cut next month, possibly as large as 0.5%.   

Meanwhile the UK government’s stance on Brexit appeared to harden this week. Boris Johnson’s spokesman repeated that the UK will leave the EU on October 31, no “ifs or buts”, and Downing Street also refused to comment on whether Johnson would ignore a vote of no confidence or any vote by parliament against a no deal Brexit. Parliament is now awash with plots and plans to either block no-deal or seek a further extension. The week started on a more positive note, however, with data from the key UK services sector showing an improvement in July. The IHS Markit purchasing managers’ index for services produced a reading of 51.4, up from 50.2 in June – the best reading in 10 months. The composite reading for the UK economy, which includes the manufacturing and construction sectors, rose to 50.3 in July from 49.7 in June. Any reading above 50 suggests the economy is expanding rather than contracting, and points to a better start in the third quarter than it managed in Q2.

On Tuesday, however, data emerged suggesting that retailers had their worst month on record in July, as Brexit uncertainty weighed on consumer spending. The British Retail Consortium (BRC) and accountancy firm KPMG released data showing that total sales increased by 0.3% in July compared to a year earlier, marking the lowest annual growth rate since records began in 1995.

 

 


The value of investments and any income from them can fall and you may get back less than you invested. Past performance is not a guide to future performance and performance is shown before charges, which would reduce the illustrated performance.

No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us. We or a connected person may have positions in or options on the securi-ties mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition, we reserve the right to act as principal or agent with regard to the sale or purchase of any security men-tioned in this document.For further information, please refer to our conflicts policy. If you invest in currencies oth-er than your own, fluctuations in currency value will mean that the value of your investment will move independent-ly of the underlying asset.

The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.

The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

Your next steps

Manage Your Wealth

Start a conversation

Find out how we can help guide your wealth journey, by requesting a callback from a member of our team.

FIND OUT MORE
CLOSE

REQUEST A CALLBACK

I am ready to start a conversation

Find out how we can help guide your wealth journey.

We will match you to the Brewin Dolphin office that is closest to your Post Code for your initial conversation.

Please select if you would like to choose a Brewin Dolphin office other than the one closest to your post code.

Understanding your level of wealth will inform our conversation about which services would be most suitable for your circumstances.

Are you a Brewin Dolphin client?

We respect your privacy and take protecting it very seriously. We will only use your data in order to arrange a meeting to discuss your needs (as explained above) and as set out in our Privacy Notice. In keeping with our existing practice, we will never sell your personal data to any third parties. You can change your preferences for how we use your data at any time by contacting your usual contact at Brewin Dolphin by phone, post or email. Please allow 14 days from receipt of your information for any changes to be reflected across our systems. 
We do not sell, rent or loan any identifiable information collected on this site. Any information that you give us will be treated with the utmost care and security. It will not be used in ways to which you have not consented.

Get Started in Minutes

Start investing online

Start investing from £2,000 with the Brewin Portfolio Service. Sign up online. Simple, accessible and cost efficient. Capital at risk.

FIND OUT MORE

Receive Our Insights

Stay updated

Receive email updates with news and views from Brewin Dolphin and information on our products and services.

FIND OUT MORE
CLOSE

Newsletter Signup

Stay updated

Receive email updates with news and views from Brewin Dolphin and information on our products and services.

Capturing your post code will allow us to tailor some of our communication to include regional views and updates that may be of interest to you.

We respect your privacy and take protecting it very seriously. We will only use your data in accordance with your preferences stated above. In keeping with our existing practice, we will never sell your personal data to any third parties.

If, in the future, you would like to update any of your marketing communication preferences, you will receive an email that will provide a link to our Preference Centre.