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.


Big oil feels the heat on climate as industry leader promises: ‘We will be different’

Updated 22 January 2020

Big oil feels the heat on climate as industry leader promises: ‘We will be different’

  • Trump singles out ‘prophets of doom’ for attack
  • Greenpeace told the Davos gathering that the world’s largest banks, funds and insurance companies had invested $1.4 trillion in fossil fuel companies since the Paris climate deal

LONDON: Teenage environmental activist Greta Thunberg slammed inaction over climate change as the global oil industry found itself under intense scrutiny on the opening day of the World Economic Forum in Davos.

The teenage campaigner went head to head with US President Donald Trump, who dismissed climate “prophets of doom” in his speech.
She in turn shrugged off the US president’s pledge to join the economic forum’s initiative to plant 1 trillion trees to help capture carbon dioxide.
“Planting trees is good, of course, but it’s nowhere near enough,” Thunberg said. “It cannot replace mitigation. We need to start listening to the science and treat this crisis with the importance it deserves,” the 17-year-old said.
The 50th meeting of the World Economic Forum was dominated by the global threat posed by climate change and the carbon economy.
The environmental focus of Davos 2020 caps a year when carbon emissions from fossil fuels hit a record high, and the devastating effects of bushfires in Australia and other climate disasters dominated the news.
Oil company executives from the Gulf and elsewhere are in the spotlight at this year’s Davos meeting as they come under increased pressure to demonstrate how they are reducing their carbon footprint.
“We are not only fighting for our industry’s life but fighting for people to understand the things that we are doing,” said Vicki Hollub, CEO of Occidental, the US-based oil giant with extensive oil operations in the Gulf. “As an industry when we could be different — we will be different.”

‘Planting trees is good, but nowhere near enough,’ activist Greta Thunberg told Davos. (Shutterstock)

She said the company was getting close to being able to sequester significant volumes of CO2 in the US Permian Basin, the heartland of the American shale oil industry which is increasingly in competition with the conventional oil producers of the Arabian Gulf.
“The Permian Basin has the capacity to store 150 gigatons of CO2. That would be 28 years of emissions in the US. That’s the prize for us and that’s the opportunity. People say if you’re sequestering in an oil reservoir then you are producing more oil, but the reality is that it takes more CO2 to inject into a reservoir than the barrel of oil that it makes come out,” Hollub said.
The challenge Occidental and other oil companies face is to make investors understand what is happening in this area of carbon sequesteration, she added.
The investment community at Davos is also looking hard at the oil industry in the face of mounting investor concerns.
Greenpeace told the Davos gathering that the world’s largest banks, funds and insurance companies had invested $1.4 trillion in fossil fuel companies since the Paris climate deal. It accused some of these groups of failing to live up to the World Economic Forum goal of “improving the state of the world.”