With word that Britain’s economy is shrinking following the Brexit vote, the UK’s finance minister Philip Hammond is promising a “reset” of government policy if the weakness continues.
July saw a dramatic deterioration in the economyChief economist Markit
Hammond – in China for a meeting of finance ministers from the G20 top economies – tried to counter business surveys indicating Britain is heading for recession.
He said they show businesses’ confidence had been “dented”, but it is the government’s job to restore confidence by progressing trade talks with the European Union and other countries, including China.
Also in Beijing, the head of the International Monetary Fund Christine Lagarde repeated her call for Europe to quickly resolve questions over Brexit: “Our first and immediate recommendation is for this uncertainty surrounding the terms of Brexit to be removed as quickly as possible.
Uncertainty over Britain’s trading future with Europe has caused gloom among UK companies,particularly in the services sector which is one of the few drivers of economic growth.
They report orders plunging and confidence crumbling.
That suggests the UK economy is shrinking faster than at any time since the aftermath of the global financial crisis in 2008 which means finance minister Hammond might have to rethink the British government’s austerity measures.
Dismal set of UK #PMI data. Service sector slows to 7 year low 47.4, manufacturing to 3 year low 49.1
EburyUK</a> <a href="https://t.co/THs2b314JA">pic.twitter.com/THs2b314JA</a></p>— Matthew Ryan (mryan815) July 22, 2016
“July saw a dramatic deterioration in the economy,” said Chris Williamson, chief economist with Markit, the organisation that surveyed the executives who make spending decisions at 1,250 large British firms.
“The downturn, whether manifesting itself in order book cancellations, a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to Brexit,” Williamson added.
The Bank of England has also been clear that easing monetary policy may be necessary.