MAM: One Step Beyond: Is the UK heading into recession in 2020?

Boris-Johnson-after-being-named-the-new-leader-of-the-Conservative-Party

Political uncertainty.

Then there is Brexit. ‘Deal or No Deal’. Britain is going to leave the EU on October 31st 2019.

Uncertainty everywhere. One thing however, which is certain – the UK economy is heading for recession. Sorry to be the bearer of bad news.

Add the possibility of a snap general election, after the “No Deal” Brexit is “achieved”, we could see the political obliteration of the Conservatives as a party (as we know it), sorry Johnson, and the installation of a minority Lab-Lib Dem government, with “brother” Corbyn as Prime Minister – “Power to the People”, I hear you cheer!

Throwing this general election “curveball” into the equation, plus a weakening UK economy, things do not look “bright” nor do they look “orange.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, also fears economic turmoil ahead: “With a dampened mood across the sector, if a general election is also thrown into the pot of political turmoil in the coming months, then the service sector runs an even greater risk of following the manufacturing and construction sectors into cutbacks, cost-cutting and reduced workforces.”

Data firm Markit’s composite PMI, which tracks the private sector, said activity shrank in June for the first time since 2016. The service sector stagnated, while manufacturing and construction both shrank sharply.

Brexit and global trade concerns is the likely explanation for poor manufacturing data, in regards to construction contraction, this might be simply due to a lack of confidence hurting investment.

“It isn’t all bad news,” says Andrew Wishart, UK Economist at Capital Economics. Well that’s alright then.

“Some of the other balances of the services PMI improved. The backlogs of work and employment balances of the survey, which are historically the best guides to how the services sector will fare over the next few months, ticked up to an eight- and 22-month high respectively,” adds Wishart.

We are not out of the woods yet. The outgoing Bank of England, Mark Carney famed for his “Project Fear” stance, is fuelling the fire of a stalled UK economy, he said recently in a conference in Bournemouth: “Growth in the second quarter will be considerably weaker, in part due to the absence of that stock building effect and Brexit-related, temporary shutdowns by several major car manufacturers.

“Recent data also raise the possibility that the negative spill-overs to the UK from a weaker world economy are increasing and the drag from Brexit uncertainties on underlying growth here could be intensifying. The latest surveys point to no growth in UK output.

“Looking across the first half of the year, in my view, underlying growth in the UK is currently running below its potential, and is heavily reliant on the resilience of household spending.”

So, there we have it.  Perhaps, time-travellers Bill and Ted should be recruited to save us all from this mess. Now that would be Bodacious, and a twist to the plot-line.

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