GDP contracted by 0.2% in the second quarter, the first contraction since 2012, official figures show.
Numbers for January to March showed the economy grew by 0.5%.
“Fears of renewed turmoil in Italy helped push the FTSE 100 on to the back foot in early trading on Friday, surrendering some of Thursday’s gains.
“Sterling was also in the red ahead of UK GDP data and one company counting the cost of the weak currency was travel outfit OnTheBeach which warned on profit thanks to the increase in prices necessitated by the plunge in the pound,” said AJ Bell investment director Russ Mould.
Yael Selfin, Chief Economist at KPMG UK said, “Dismal Q2 figures point at more than a short-term adjustment to earlier stockpiles.
“Figures released today show the UK economy continued its downward slide in Q2, with growth in the services sector, which was less affected by the movement in stockpiling earlier this year, falling for the third consecutive quarter.
“It is clear that the uncertainty and prospects of Brexit are causing havoc on the UK business environment, with business investment contracting once again, and significantly hurting the future prospects of the UK economy.
“The outlook for the UK economy remains very fragile in the short term, with the odds of a technical recession (i.e. two consecutive quarters of negative growth), relatively high.”
Ranko Berich, Head of Market Analysis at Monex Europe said, “GDP has contracted on a quarterly basis for the first time since 2012 on Brexit uncertainty and a stockpile hangover, removing any lingering doubts about the fact that the UK economy simply has no capacity for dealing with any further shocks. The writing was on the wall for Q2 GDP months ago as survey data has pointed to a collapse in business investment and output due to Brexit.
“Business investment has now contracted for five of the past six quarters in the UK; the economy has been propped up instead by the Government and households. This is a plainly unsustainable situation for the economy, and highlights the extent to which Brexit has already taken a significant toll. Survey data leaves no doubt about what’s behind the investment drought: increased uncertainty from the ongoing disaster in Westminster and Brussels.
“Without the stockpiling drag, there is some hope for a modest bounce in Q3; but given that businesses are understandably reluctant to invest in the face of extreme political uncertainty, growth remains dependent on consumers and the Government. If consumers finally decide to tighten their belts, for example in the face of a looming no-deal shock, a recession for the UK economy is all but assured even if the Conservative Government abandons its fiscal principles and goes for full blown Keynesian easing.”
TUC General Secretary Frances O’Grady said, “Negative growth at home and weaker growth around the world is a major worry for workers and business.
“The Prime Minister’s toxic threat to crash out of the EU without a deal only adds to the alarm. It damages confidence in the economy, putting people’s jobs at risk.
“No responsible leader would contemplate inflicting such a crisis on the nation.
“The government should protect us from the current dangers by taking no-deal off the table and giving our economy urgent support through investment in public services.”
FSB Policy & Advocacy Chairman Martin McTague said, “Trying to get a horse under control once it’s bolted is an incredibly risky business. Today’s figures clearly demonstrate the need for the Chancellor to intervene with an Emergency Budget before Brexit happens. If the Treasury delays action until after 31 October, its efforts will likely prove too little too late.
“Since April, small firms have not only had sustained political uncertainty to handle but also new HMRC reporting requirements, a higher National Living Wage, increases to auto-enrolment contributions and fresh business rates hikes. Confidence among small firms has been in the doldrums for a year now.
“Time is of the essence. Unless the Chancellor steps in imminently with radical action, we could be heading for a chaotic autumn – and a very long winter.”