Britain on the cusp of recession

Property developments are pictured in the City of London. Britain’s economy unexpectedly shrank in the second quarter of this year on Brexit turmoil, official data showed, placing the country on the verge of recession. (AFP)
Updated 11 August 2019

Britain on the cusp of recession

  • Dramatic slump in construction and manufacturing sectors blamed for fall in UK gross domestic product

LONDON: Britain’s economy unexpectedly shrank in the second quarter of the year on Brexit turmoil, official data showed, placing the country on the verge of recession and sending the pound tumbling to a 2.5-year low.
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 in a statement, blaming a dramatic slump in the construction and manufacturing sectors.
The data, which was worse than market expectations for zero growth and also reflects global economic strains, sent the pound diving to $1.2056 — the lowest level since early 2017.
Another contraction in the current third quarter would put Britain in an official recession, ahead of the nation’s expected withdrawal from the EU at the end of October.
“The latest data reveal an economy in decline and skirting with recession as headwinds from slower global economic growth are exacerbated by Brexit-related paralysis,” said IHS Markit economist Chris Williamson.
The result contrasted with 0.5-percent expansion in the first quarter, when activity was boosted by companies stockpiling ahead of Brexit.
Output was buoyed in the first three months of 2019 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, ONS head of GDP.
“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.
British Prime Minister Boris Johnson replaced Theresa May after winning the Conservatives’ leadership contest on a pledge to take Britain out of the bloc on Oct. 31 with or without a divorce deal.

The latest data reveal an economy in decline and skirting with recession as headwinds from slower global economic growth are exacerbated by Brexit-related paralysis

Chris Williamson, IHS Markit economist

Brexiteer Johnson, a pivotal “Leave” campaigner in the 2016 EU exit referendum, has repeatedly insisted that Britain can make an economic success of Brexit.
Chancellor of the Exchequer Sajid Javid on Friday said that the global economy was slowing, but highlighted other recent positive data for the UK.
“This is a challenging period across the global economy, with growth slowing in many countries,” said Javid.
“But the fundamentals of the British economy are strong — wages are growing, employment is at a record high and we’re forecast to grow faster than Germany, Italy and Japan this year,” he added.
“The government is determined to provide certainty to people and businesses on Brexit — that’s why we are clear that the UK is leaving the EU on Oct. 31.”
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.
Bank of England Gov. Mark Carney recently warned that a no-deal Brexit could undermine entire sectors of the economy such as the car industry and farming.
“The latest look at the UK economy makes for pretty grim viewing,” XTB analyst David Cheetham said in reference to Friday’s data.
“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.”
May stepped down after failing to get her EU-divorce deal through parliament and being forced to delay Brexit twice.


Emirates trims Boeing shopping list amid 777X delays

Updated 20 November 2019

Emirates trims Boeing shopping list amid 777X delays

  • The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion
  • But Emirates’s purchases overhaul reduces the order to 30 planes

DUBAI: Emirates Airline on Wednesday slimmed down its purchasing plans with Boeing amid delays in delivering an order of 156 of the new long-range 777X aircraft, substituting instead 30 of its 787-9 Dreamliners.
The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion, but the overhaul reduces that to 30.
At the same time, Emirates is cutting its 156-strong order of the larger 777X to 126 planes.
The restructuring means that the carrier now has just 156 aircraft ordered from Boeing, compared to 196 previously in both firm orders and initial agreements, an airline spokeswoman confirmed to AFP.
“Emirates reduced its 777X order of 156 to 126 and substituted them with the Dreamliners,” Emirates president Tim Clark told a news conference at the Dubai Airshow.
Boeing said the airline will update its order book “by exercising substitution rights and converting 30 777 airplanes into 30 787-9s.”
Emirates said in a statement that for the 777X, it “will enter into discussions with Boeing over the next few weeks on the status of deliveries.”
Emirates in 2013 signed a $76-billion contract for 150 Boeing 777X twin-engine aircraft, powered by GE’s new GE9X engine, in what was the single largest order by value in the history of US commercial aviation.
The order was subsequently increased to 156 planes.
The 777X was originally scheduled to take off on its first test flight this summer, however its development has been slowed by issues with the engine and Boeing has pushed back the timeframe to early 2021.
The delays also hit as Boeing is in the process of completing changes required by regulators on the 737 MAX, which has been grounded worldwide after two crashes that resulted in 346 deaths.