Tuesday 25 June 2019

UK slides into steeper decline as Brexit bites

Contraction worse than feared

Decelerating: Car production in April fell 24pc on the month, the biggest drop since records began in 1995. Photo: PA
Decelerating: Car production in April fell 24pc on the month, the biggest drop since records began in 1995. Photo: PA
Donal O'Donovan

Donal O'Donovan

The UK economy contracted sharply in April as Conservative Party MPs jostled for a Brexit-dominated leadership contest while data showed the biggest decline in car production since records began.

The weak economic data was impacted by factory shutdowns in April at British car manufacturing sites.

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The closures had been scheduled, anticipating a possible crash-out Brexit on Match 29. The Brexit deadline was extended too late for manufacturers to change plans.

The UK economy overall contracted by 0.4pc in April after a 0.1pc decline in March, Britain's Office for National Statistics said yesterday. It was the biggest drop since March 2016 and a larger fall than any economist had forecast in a Reuters poll last week.

In contrast the Irish economy continues to grow, despite some weakening in consumer sentiment due to ongoing Brexit uncertainty, according to the latest Banking & Payments Federation Ireland (BPFI) SME Market Monitor prepared by EY-DKM Economic Advisory Services.

EY-DKM Economic Advisory director Annette Hughes said the Irish data is showing a mismatch between weaker consumer sentiment on the one hand and a buoyant labour market and strong household spending on the other.

She blamed Brexit for the disconnect, adding: "For many, Brexit remains firmly in the background, despite the positive economic news at home. Until such a time as there is a clear outcome for Brexit, this ambiguity is likely to continue to weigh on consumer and business sentiment."

In the UK, growth in the three months to April slowed to 0.3pc from 0.5pc in the first quarter of 2019, also a sharper deceleration than most economists had expected. Annual growth dropped to 1.3pc.

Britain's National Institute of Economic and Social Research (NIESR) forecast after the data that the economy would contract by 0.2pc in the second quarter, ending more than six years of unbroken quarterly growth.

Problems went beyond the drop in car production, NIESR economist Garry Young said: "Brexit-related uncertainty at home and trade tensions abroad (are) dragging on investment spending and economic growth."

April's fall in overall economic output masked a far bigger impact for manufacturing, which shrank by 3.9pc for the month in April, the biggest fall since June 2002.

Car production in April fell 24pc on the month, the biggest drop since records began in 1995, and the broader category of "transport equipment" showed its largest drop since 1974.

BMW shut its UK Mini and Rolls-Royce plants for all of April. Peugeot's Vauxhall car factory and Jaguar Land Rover also brought forward planned summer shutdowns to April.

Additional reporting Reuters

Irish Independent

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