UK economy avoids falling into recession

The numbers don’t make for pleasant reading though as the figure didn’t quite meet expectations

Article updated: 11 November 2019 1:00pm Author: Helal Miah

  • GDP growth slowed to 1% year-on-year in Q3, down from 1.3% in the second quarter.
  • UK avoids recession thanks to a strong start in July, a bounce from the previous weak quarter but as Q3 progressed conditions slowed as the September figure of -0.1% showed.
  • Brexit uncertainties played a big part in quarter and for the year on year figure which was amongst the slowest in nearly a decade.
  • Current quarter filled with uncertainty and the outcome on 12 December will be pivotal to whether companies can be confident enough to release pent up investment spending needs.
  • For equity investors, it is difficult to base one’s portfolio on huge uncertainties as these and we take the view that it is best to stay put and not make radical changes to a well balanced portfolio.

Today’s results will come as a big sigh of relief for the current government during the election period. Despite this, the numbers don’t make pleasant reading as the figure was shy of expectations and the year on year figure was a weak 1% compared to 1.3% last time around.

The UK avoided a recession thanks to a strong start for the quarter in July; a bounce from the previous weak quarter. But as the third quarter progressed it seems conditions slowed as the September figure of 0.1% showed. No doubt Brexit uncertainties played a big part in quarter and for the year on year figure which was amongst the slowest in nearly a decade.

It seems the services sector is keeping economy above water, but the industrial and manufacturing sectors look bleak with another decline in September of 1.4% and 0.4% respectively. These numbers are not too much of a surprise given the huge amount of uncertainty in the political and economic environment and partly reflective of the Bank of England’s sentiment last week where two policy members voted for a rate cut.

The current quarter is filled with a great deal of uncertainty and the General Election outcome will be pivotal to whether companies can be confident enough to release pent up investment spending needs. A Conservative win will be welcomed by the markets initially but will reflect on the longer-term implications of Boris Johnson’s relatively hard Brexit deal, while Jeremy Corbyn will put the fear into capitalists, but will a Lab/Lib coalition temper the hard left tendencies? Either way, the markets have recently taken the view that the Bank of England is readying itself for another rate cut rather than a rate rise.

For equity investors, it’s difficult to base one’s portfolio on huge uncertainties and we take the view that it’s best to stay put and not make radical changes to a well balanced portfolio.


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Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment. 

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