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UK economy shrinks for the first time since 2012

UK economy shrinks for the first time since 2012

The chancellor has told the BBC that he does not expect the UK to slide into recession after data showed the economy shrank by 0.2% between April and June.

Sajid Javid was speaking after the Office for National Statistics said the economy had contracted for the first time since 2012.

The surprise decline came after Brexit stockpiles were unwound and the car industry implemented shutdowns.

The pound sank after the data was released, raising fears of a recession.

Against the dollar sterling fell to $1.2025. Against the euro, it dropped throughout the day to €1.0736, a level not seen since the global financial crisis a decade ago.

Rob Kent-Smith, head of GDP at the ONS, said manufacturing output fell and the construction sector weakened.

A recession occurs when the economy contracts in two consecutive quarters. This is the first contraction since the fourth quarter of 2012.

Economists had not been forecasting a contraction in the economy in the second quarter, but had expected it to stagnate, with the consensus forecast for 0% growth.

chancellor, Mr Javid told the BBC: "I am not expecting a recession at all. And in fact, don't take my word for it. There's not a single leading forecaster out there that is expecting a recession, the independent Bank of England is not expecting a recession. And that's because they know that the fundamentals remain strong."

The Bank said earlier this month it expects the economy to grow by 1.3% this year , down from a previous projection of 1.5% in May.

Asked about the impact of Brexit, he said: "We saw some significant stockpiling by British businesses in anticipation of the Brexit that never was, and now they're using those stockpiles, they're coming down.

"Of course, there are businesses out there that are taking Brexit into account when they're making decisions."

He said: "No one will be surprised by today's figures."

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