Britain already at ‘significant risk’ of recession: UK households remain cautious

LONDON July 23: UK households remain concerned about their economic outlook, disposable incomes and debt levels, survey data out today shows.

Deloitte’s consumer confidence index for the UK in the second three months to 30 June remained at a minus eight per cent – unchanged from the first quarter – but down four percentage points from the same time last year.

Despite resilient employment and earnings figures released last week by the Office for National Statistics, Brits are still feeling uneasy about their ability to cover costs.

Consumer sentiment towards household disposable income and levels of debt fell by five and four percentage points, respectively, year-on-year.

Deloitte suggested that the contrast was due to economic and political uncertainty and potential risks to UK GDP growth from trade wars and a messy divorce with the European Union.

Ian Stewart, chief economist at Deloitte, said: “Consumers’ finances are in good shape thanks to a long boom in jobs and strong wage growth. That said, uncertainties about Brexit and growth are weighing on consumer sentiment and their spending plans.

Meanwhile, leading economists warned yesterday that Britain has been so hard hit by Brexit that there is a “significant risk” that it is already tipping into recession.

The National Institute of Economic and Social Research (NIESR) believes there is around a one-in-four chance that the economy will have shrunk from April to June and will also do so in the following three months.

It also puts the likelihood of a no-deal exit from the EU at some 40 per cent.

Even if such a no-deal departure could be done in an “orderly” way, it would still snuff out any economic growth in 2020 and send inflation to over four per cent, denting living standards for millions of families.

The UK is heading towards quitting the EU with the economy appearing to have lost any “significant momentum” given the “chronic” uncertainty facing businesses due to Brexit and slowing global growth, according to the NIESR.

“There is a significant risk that the economy is already in a technical recession,” it added.

The respected economists predicted that GDP contracted by 0.1 per cent in the three months to June.

They do expect the country to “narrowly” avoid recession, defined as two consecutive quarters of negative growth, with the economy forecast to post growth of 0.2 per cent in the three months to September.