LONDON: Britain's
economy unexpectedly shrank in the second quarter of the year on Brexit
turmoil, official data showed Friday, 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.

Brexit paralysis?

"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 European Union 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 in July
after winning the governing Conservatives' leadership contest on a pledge to
take Britain out of the bloc on October 31 with or without a divorce deal.

Brexiteer
Johnson, a pivotal 'Leave' campaigner in the 2016 EU exit referendum, has
repeatedly insisted that Britain can make an economic success of Brexit. New
finance minister 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
31 October."

'Pretty grim'

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 governor 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." Johnson's predecessor May
stepped down last month after failing to get her EU-divorce deal through
parliament and being forced to delay Brexit twice. - AFP