The UK economy is one step away from a possible recession, after shrinking 0.2% in the second quarter.

It is the first time the country's GDP - the measure of economic expansion - has contracted since late 2012.

Sky News economics editor Ed Conway said the result was "worse than expected" and comes after "relatively strong growth" of 0.5% in this year's first quarter.

He said: "Any economist looking at this will say this is a big disappointment."

Among the main points:


Manufacturing output fell by 2.3%, the biggest calendar quarter fall since 2009;

The important services sector grew, but at the weakest rate since early 2016;

Business investment, which has been weak since the June 2016 Brexit vote, faltered further in the second quarter, contracting by 0.5%.

Despite this, Chancellor Sajid Javid said the fundamentals of the UK economy are "strong".

He said IMF figures predict the UK will grow faster than Germany, Italy and Japan this year.

Conway said: "Overall global growth is stuttering...we may see contraction in other major economies in Europe as well.

"There are also other effects - Brexit and Brexit preparations are having a big impact on these numbers.

"There was a lot of stockpiling in the first quarter and a lot of factory shut downs in the second quarter and that might be what has helped contribute to that number."

Image: Some car factories halted production in April to mitigate against Brexit

If the economy shrinks further in the third quarter, then the resulting recession would be the first since the financial crisis and recession of 2008-09.

But it will not be clear whether the UK has managed to avoid this or not until early November - after the 31 October deadline for the UK to leave the European Union.

Reacting to the GDP news, the pound fell to a 31-month low against the US dollar ($1.2056) and a two-year low against the euro (92.885p).

Here it is in chart form: UK GDP shrinking by 0.2% in the second quarter. Biggest contraction since late 2012 pic.twitter.com/kGAzmjV7HF — Ed Conway (@EdConwaySky) August 9, 2019

Suren Thiru, head of economics at the British Chambers of Commerce, said the economy "hit the buffers in the second quarter".

He added: "We're seeing the unwinding of heightened levels of stockpiling, growing anxiety over the prospect of a no deal exit and moderating global growth having an increasingly chilling effect on economic activity."

Seamus Nevin, chief economist at Make UK, the manufacturers' organisation, said the fall was "disappointing but not surprising".

"Some would have expected the decline in the price of the pound to have offset this by making UK goods more affordable to foreign consumers, but the fact that UK supply chains are some of the most internationally integrated in the world means this hasn't helped," he said.

Reality check: UK is probably not in recession. Q2’s weak figures are prob a temporary dip, not a sign of genuine economic collapse. All being well, Q3 should be positive (tho the quarter is still ongoing!). But the nos do provide a challenge for @sajidjavid to explain — Ed Conway (@EdConwaySky) August 9, 2019

"These figures add to the recent Bank of England warnings and will reinforce worries that the global economy is in a downward spiral."

Chris Williamson, chief business economist at IHS Markit, said: "Given the backdrop of slower global economic growth and heightened Brexit uncertainty, the UK economy looks set to struggle in coming months.

"There's a chance that we could see growth lift higher amid no-deal Brexit planning as we head towards 31 October, but the headwinds in the wider economic environment mean any such boost is likely to prove all too brief."