Has The UK Economy Gone Into Recession?

Latest figures from the Office for National Statistics (ONS) show that the UK economy contracted by 0.3 per cent in November compared to the 0.1 per cent growth during the two preceding months. 

Analysts were surprised by the contraction and had instead predicted that the economy would remain flat in November.

Sharp falls in the service and production sectors were the key drivers in the manner in which the economy shrank, with the ONS data indicating the sharpest decline in GDP in seven months.

The uncertainty around Brexit negotiations and the potential of leaving the EU without a deal, as well as the general election were key factors adversely affecting firms.

Manufacturing fell by 1.7 per cent, which contributed to a 1.2 per cent month-on-month contraction in the UK's production sector, with declines in the areas of transport equipment, food, and chemicals. In contrast, the construction sector appeared to perform well with output going up by 1.9 per cent in November. Adding to fears that the economy could now go into recession is the position of Prime Minister Boris Johnson on negotiations with the EU regarding a lasting trade deal with the EU. Mr Johnson has made it clear that he was not going to seek an extension to the deadline of the end of December 2020 for reaching a comprehensive with the EU. People recognize that the country could end up in the same situation that it was in just before the general election when the government and the EU were scrambling to thrash out a transition deal before the deadline. This is having a dampening impact on the economy, and consequently, a key question is whether the Bank of England (BoE) will take any action to support the economy such as a cut in interest rates.


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