As the UK’s gross domestic product (GDP) fell by 0.2% in the second quarter of 2019, while political pressure is mounting on Boris Johnson’s new government to avoid the catastrophic consequences of a “no-deal” Brexit.
The decline in the UK’s GDP is the first of its kind since the last quarter of 2012 and is worse than original projections of zero growth.
On Friday, the British government underscored the significance of the global economic slowdown, pointing to expectations that the UK is on course to outperform Germany, Italy, and Japan in terms of annualized growth.
The UK economy grew by 0,5% in the first quarter, largely because companies stockpiled in anticipation of a possible no-deal exit. On Friday, the new Chancellor Sajid Javid pointed to strong economic fundamentals – employment and purchasing power – insisting that the determination to leave the EU by October 31 would increase business confidence by reducing uncertainty.
Critics point out that the data released by the UK’s Office for National Statistics (ONS) on Thursday were far worse than originally projected. Negative growth reflects a slowdown in the manufacturing output, particularly in the auto industry. Construction is also affected.
The Bank of England has warned that at this point the UK is likely to experience a recession regardless of whether the country leaves the EU without a deal or not. Meanwhile, the pound continues to sink both against the dollar and the euro, not least due to market expectations of an interest-rate cut in January 2020.
Assurances by the British government that there may yet be a deal with the EU seem unconvincing.
British Prime Minister Boris Johnson accepted an offer by his Irish counterpart on Sunday to meet to discuss Brexit and Northern Ireland. However, Leo Varadkar’s spokesperson t reiterated that the backstop and the Withdrawal Agreement are not up for discussion.
The EU has said the withdrawal agreement negotiated by Theresa May will not be re-opened, especially the so-called Irish “backstop,” which aims to keep the border between Ireland and Northern Ireland open by keeping Northern Ireland within the EU’s single market if no alternative arrangement can be found. In turn, the British government regarded the reopening of the EU withdrawal agreement as a precondition to any deal.
The outgoing President of the European Commission, Jean-Claude Juncker, made clear on Sunday that the UK stands to lose more from a no-deal Brexit. “They are acting as though that were not the case but it is,” Mr Juncker told the Tiroler Tageszeitung newspaper.