The Office for National Statistics (ONS) have revealed that the UK economy has fallen by 0.2% between April and June 2019 – the worst performing time frame since 2012.
This has been a surprise to financial experts, many of whom predicted a 0% forecast growth, as the UK had been experiencing consistent growth for the first few months of the year.
However, ONS revealed that the fall was in part down to a fall in manufacturing output and a weakening property and construction sector.
The news follows a call from the Federation of Small Businesses (FSB) for an Emergency Brexit Budget to be produced prior to 31 October.
The UK’s largest business group is calling for a cut to Employer National Insurance Contributions (NICs) from 13.8% to 12%, an uprating of the Employment Allowance from £3,000 to £4,000, Brexit vouchers for those already impacted by the prospect of no-deal, and wider roll-out of HMRC’s Time to Pay measures.
The Small Business index was in negative territory for an unprecedented fourth straight quarter in Q2 2019.
FSB Policy & Advocacy Chairman Martin McTague said: “Trying to get a horse under control once it’s bolted is an incredibly risky business. Today’s figures clearly demonstrate the need for the Chancellor to intervene with an Emergency Budget before Brexit happens. If the Treasury delays action until after 31 October, its efforts will likely prove too little too late.
“Since April, small firms have not only had sustained political uncertainty to handle but also new HMRC reporting requirements, a higher National Living Wage, increases to auto-enrolment contributions and fresh business rates hikes. Confidence among small firms has been in the doldrums for a year now.
“Time is of the essence. Unless the Chancellor steps in imminently with radical action, we could be heading for a chaotic autumn – and a very long winter.”
Alpesh Paleja, CBI Lead Economist
The contraction in economic activity over Q2 is concerning, but much of this is due to a number of one-off factors. Growth has been pushed down by an unwind of stockpiling and car manufacturers shifting their seasonal shutdowns. Nonetheless, it’s clear from our business surveys that underlying momentum remains lukewarm, choked by a combination of slower global growth and Brexit uncertainty.
As a result, business sentiment is dire. Securing a Brexit deal before the October 31 deadline is the first step to revving up the economy. The second is re-focusing attention on vital domestic priorities – such as pressing ahead with key infrastructure projects – to boost productivity and growth potential over the longer-term.