Is Britain economy facing ‘heightened risk of recession’?

Is Britain economy facing 'heightened risk of recession’
Source: https://www.freemalaysiatoday.com/category/world/2019/10/03/uk-facing-heightened-risk-of-rec...

The United Kingdom‘s economy is at a ‘heightened risk of recession’ and it is really an alarming situation according to economists. They are claiming that the UK’s dominant service sector falters is the main reason behind this risk of recession. In September, purchasing managers’ index data for the service sector has warned about the increasing risk of a recession in this country. In September, the point drops from 50.6 to 49.5 and it is clearly indicating that the service sector is prone to fall even below the neutral 50 points level. This 50 points level mainly divides growth from contraction.

IHS Markit’s latest UK Manufacturing Purchasing Managers’ Index showing that in September, factory activity has hit 48.3 points. And this is really an alert!

Rob Dobson, IHS Markit director, added, “Output, new orders and employment all fell further as rising political, trade and economic uncertainties exacerbated concerns about Brexit,” and cautioned that the sector may be sliding into recession. Separately, the Chartered Institute of Procurement & Supply warned manufacturers are cutting jobs at the fastest pace for six years.”

What others are saying?

Dun & Bradstreet’s chief economist, Markus Kuger, said, “The Latest Purchasing Managers’ Index data for the service sector highlights the rising risk of a recession in the UK. The drop from 50.6 points to 49.5 points in September, means the service sector is the latest to fall below the neutral 50-points line that divides expansion from contraction. This is only the fifth time in the last ten years that the service sector PMI has been below the 50-points mark.” And “Similar to the construction and the manufacturing sector, service companies are facing increasing Brexit-related headwinds which led to a weakening of the labor market as well as a softer inflow of new orders. With no resolution on the Brexit deadlock in sight, Dun & Bradstreet is maintaining its ‘deteriorating’ risk outlook for the UK economy and lowering real GDP growth forecasts for 2019 and 2020.”

Time to solve Brexit uncertainty

Brexit uncertainty is taking place over and over when we come to an increased risk of recession. Brexit uncertainty can cause serious tension between China, Europe, and the US. And this uncertainty can weaken the growth in the eurozone. Mr. Williamson said, “September’s decline is all the more ominous, being the result of an insidious weakening of demand over the past year rather than a sudden shock”.

According to a group of expert economists, fixing Brexit as soon as possible can settle the tension. Now it is truly a reality check, neither scaremongering nor politicking.

British Chambers of Commerce’s director-general, Dr. Adam Marshall, added, “Behind each and every one of these statistics sit thousands of real businesses, who are feeling the cold harsh winds of Brexit uncertainty and global trade turbulence right now.”

“We need to see immediate action to avoid a messy and disorderly Brexit on October 31st, alongside bold measures to stimulate investment and confidence across the UK. The government must also make urgent preparations to support business cash flow, where the strains of acute uncertainty are hitting businesses, and particularly manufacturers, hard.”

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