Fears of recession grow after post-Brexit slump
Experts warn of economic woes as firm blames vote for lay-offs
BRITAIN is facing a new recession in the wake of the Brexit vote, experts have warned, after new data showed the economy had recorded a “dramatic deterioration”, slumping at its fastest rate since the 2008 financial crisis.
The warnings came as Philip Hammond, the new Chancellor, signalled the UK Government’s tax and spending policy could be “reset” this autumn if the economy took a downturn following the EU referendum result.
And Sir Amyas Morse, head of the National Audit Office, the value-for-money watchdog, warned major infrastructure schemes such as Trident renewal and HS2 all needed to be reassessed in light of the Brexit vote.
He said: “It’s a tidal wave coming up the beach. It is an emergency. If we don’t get it right, it will affect our economy and standards of life in this country.
“To say we are going to carry on and do everything we did before – I just don’t think that’s going to be sustainable.”
In Scotland, the uncertainty created by the Brexit vote has been blamed for prominent construction firm Dunne Group entering administration earlier this week with the loss of more than 500 jobs. An insider at the Bathgate-based firm said its bank, Santander, had withdrawn the company’s overdraft facilities without warning, leaving the group with a significant unplanned deficit.
The source suggested the bank’s decision was a “knee-jerk” reaction to Brexit and the firm could be the first in a “long queue” of post-Brexit casualties.
Meantime, a month after the EU vote, Angus Robertson, the SNP leader at Westminster, claimed Scotland was “on the brink of independence”, in the strongest signal yet that the Nationalist leadership is considering triggering a second referendum on the nation’s future. In Cardiff, following an extraordinary meeting of the British-Irish Council to discuss Brexit, Nicola Sturgeon said the UK found itself in unprecedented times and would have to consider “unprecedented solutions”.
Downing Street has made clear the First Minister’s suggestion that Scotland could stay in the EU while being part of the UK was “impracticable”, but Ms Sturgeon said the onus was now on Whitehall to show the rest of the UK that solutions could be found. “If that doesn’t happen,” she insisted, “then for Scotland other options will have to be considered.”
The sharp contraction recorded by financial analytics firm Markit in a special edition of its Purchasing Managers’ Index (PMI) was triggered by falling output and orders for the first time since the end of 2012, while business optimism in Britain’s powerhouse services sector hit a seven-and-a-half-year low.
Chris Williamson, Markit’s chief economist, said the update showed a “dramatic deterioration” in the economy and that he expected GDP to contract by 0.4 per cent in the third quarter.
At Westminster, John McDonnell, shadow chancellor, urged Mr Hammond to “bring forward shovel-ready projects across the country to help build an economy where no-one is left behind”.
Baroness Kramer, the Liberal Democrat economic spokeswoman, called on those behind the Leave campaign to apologise to the country.
And the prospect of Brexit and the loss of EU funding for medical research could cost the lives of some vulnerable children, Great Ormond Street Hospital in London said, as it made a plea to the Government to secure a deal with Europe.
The Dunne Group had been forecasting a net profit of about £7 million to this October with a bulging order book for the next two years, the insider said, but a spokeswoman for Santander said: “Dunne Group had been making substantial losses and despite having provided increased facilities on numerous occasions to keep the business trading, the company was insolvent. Therefore, the management instructed the appointment of administrators.”