Brexit turmoil drives UK economy toward recession

Britain’s economy unexpectedly shrank in the second quarter as the country weighs up the prospect of a no-deal exit from the EU. (AFP)
Updated 10 August 2019

Brexit turmoil drives UK economy toward recession

  • Weak manufacturing and construction sectors trigger first contraction since 2012

LONDON: Britain’s economy unexpectedly shrank in the second quarter of the year on Brexit turmoil, official data showed on Friday, placing the country on the verge of a recession.

Gross domestic product (GDP) fell 0.2 percent in the April-June period, the first time the economy has contracted in almost seven years, the Office for National Statistics (ONS) said.

The data, which was worse than market expectations for zero growth, sent the pound sliding against the euro and dollar.

The latest reading contrasted with a 0.5 percent expansion in the first quarter, when activity was boosted by companies stockpiling ahead of Brexit.

Economic activity was buoyed in the first three months because Britain had initially been scheduled to leave the EU at the end of March.

“GDP contracted in the second quarter for the first time since 2012 after robust growth in the first quarter,” said Rob Kent Smith, head of GDP at the ONS.

“Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK’s original departure date from the EU.

“The construction sector also weakened after a buoyant beginning to the year, while the often-dominant service sector delivered virtually no growth at all,” he added.

Another contraction in the current third quarter would put Britain in official recession, ahead of the nation’s expected EU withdrawal at the end of October.

British Prime Minister Boris Johnson replaced Theresa May in July after winning the governing Conservatives’ leadership contest on a pledge to take Britain out of the bloc with or without a divorce deal on Oct. 31.

“The latest look at the UK economy makes for pretty grim viewing,” said XTB analyst David Cheetham.

“Given the growing threat of a no-deal Brexit that looms menacingly overhead, it would not be at all surprising if the current quarter also shows a contraction — therefore meeting the standard definition of a recession.”

The government’s official forecaster last month warned that Britain would slide into a year-long recession should it leave the EU without a deal.


Saudi finance minister reassures public on taxes

Updated 10 December 2019

Saudi finance minister reassures public on taxes

  • Mohammed Al-Jadaan: There will be no more fees and taxes until after the financial, economic and social impacts have been considered carefully
  • The government expects to generate about SR203 billion in taxes this year – more than 20.5 percent higher than the previous year

RIYADH: Saudi finance minister Mohammed Al-Jadaan pledged that there would be no more taxes or fees introduced in the Kingdom until the social and economic impact of such a move had been fully reviewed.

He was speaking at the 2020 Budget Meeting Sessions, organized by the Ministry of Finance and held in Riyadh on Tuesday, where a number of ministers and senior officials gathered following the publication of the budget on Monday evening.

“There will be no more fees and taxes until after the financial, economic and social impacts have been considered carefully, especially in terms of economic competitiveness,” said Al-Jadaan.

The government expects to generate about SR203 billion in taxes this year – more than 20.5 percent higher than the previous year and more than 10 percent higher than the expected budget for this year. 

Most of that increase has come from taxes on goods and services which rose substantially as a result of the improvement in economic activity over the year.

The reassurances from the minister come as the Saudi budget deficit is estimated to widen to about SR187 billion, next year, or about 6.4 percent of GDP.