UK Economy Shrank in August but Recession Set to be Avoided

The British economy shrank over the course of August but a recession is now expected to be avoided with GDP believed to have expanded in the full quarter up to the beginning of September.

According to the Office for National Statistics (ONS), the economy grew by 0.3 per cent during the three months to the end of August, as compared to the three months prior.

As a result, the UK is on track to avoid officially falling into recession, which is only considered the case when two consecutive quarters show contraction.

The ONS reported back in August that the scale of activity across the economy shrank by 0.2 per cent in the second quarter of this year and there were worries that similar numbers might be reported for the third quarter.

As it is, recession should be avoided, although there are still concerns around the prospects for economic growth across the country, particularly with activity having slowed in August.

The driving force behind what growth there is currently in evidence in the British economy is the services sector, where growth was tracked at 0.4 per cent in the three months between June and August. 

That performance by the services sector represented a notable upturn in growth as compared with the second quarter of this year where activity among service companies broadly speaking stagnated.

“Despite the contraction in GDP in August, the risk of the UK economy falling into a technical recession is still remote, due to strong growth in July,” explained KPMG UK’s chief economist Yael Selfin.

Experts have said that September and October figures will show overall GDP growth in part as a result of increased stockpiling activity undertaken in advance of the current October 31st Brexit deadline. 

However, it is unclear how much stockpiling has been going on across the country in recent weeks and what kind of effect that might have had on overall economic activity.

Manufacturers have been particularly struggling for growth of late with their sector having contracted by as much as 0.7 per cent during August.