The UK economy shrank in Q2, the first such occurrence since 2012, with commentators warning that worse could be to come as no-deal Brexit looms.

Pressure was added to Sterling, already reeling from Brexit fears, after the Office for National Statistics released its GDP data showing a 0.2% contraction in the UK economy.

No-deal Brexit fears ramped up

In a world where economic slowdown is widespread, the country is plagued by ongoing Brexit uncertainty, coming to a head recently when Boris Johnson’s appointment as prime minister greatly increased chances of the UK leaving the EU without a deal on October 31st.

A ramping up of no-deal preparations saw the pound fall to its lowest level against the dollar since March 2017, with a further slide to $1.20 triggered by the announcement of the GDP data in Q2.

“Sterling is already trading at its lowest levels for two years against both the US Dollar and the Euro, having fallen by 8% since May due to markets re-pricing in a hard Brexit,” says Andy Scott, associate director at financial risk advisor, JCRA.

“If the economy slips into recession, alongside the risk of a hard Brexit and a general election, Sterling will likely suffer further losses.”

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

No -deal Brexit and general election perfect storm for UK economy

A general election, it seems, would only add to the pound’s woes, as the possibility of a change of government would add fuel to the fire of uncertainty.

Nigel Green, founder and CEO of financial consultancy deVere Group, states: “The situation will get even more serious should a Jeremy Corbyn-led Labour government win that election.

“His high tax and low-profit policies and anti-business rhetoric would deliver a hammer blow to the already floundering UK economy.”

“Depressingly, Britain appears to be stumbling towards an economic abyss.”

Eyes will be trained on what steps the Bank of England takes in order to stave off these concerns.

Major central banks have already begun to act in response to gloomy global outlook, with the US Federal Reserve cutting its rate for the first time in a decade recently and the ECB hinting at doing the same in September.

Geoffrey Yu, head of the UK investment office at UBS, says: “As uncertainty continues to loom over the UK economy, the difficult run of data is expected to continue and the Bank of England will need to consider its next step carefully as its global peers embark on further rate cuts.”