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  HOME | Business & Economy (Click here for more)

UK Economy Shrank in April as Brexit Hit Car Production

LONDON – The United Kingdom’s economy shrank in April as car makers took the precaution of shuttering their factories in the weeks surrounding the original date for leaving the European Union.

The figures suggest the economy slowed in the second quarter after a strong start to the year, as uncertainty over Brexit intensified.

Britain’s withdrawal from the EU has twice been delayed amid political infighting over the terms of departure and is currently scheduled for Oct. 31.

The chance of an abrupt and messy split between Britain and the EU is just one of multiple risks facing the global economy. Concerns over the outlook have grown in recent weeks amid continuing tensions over trade and a slowdown in China. The United States Federal Reserve has signaled its next move may be to cut interest rates to support the US economy.

The UK economy shrank 0.4 percent in April compared with March, the Office for National Statistics said on Monday, the largest monthly decline since March 2016.

The contraction was driven by the manufacturing sector. Car production plunged 24 percent on the month because major manufacturers shifted regular maintenance shutdowns to the period surrounding March 29, the original date for the UK’s planned withdrawal from the EU.

The shutdowns were designed to guard against any disruption to production from an abrupt split.

In the event, the EU instead agreed to give UK Prime Minister Theresa May more time to try and win majority support for her withdrawal deal with Brussels.

May failed three times to get parliamentary backing for her plan and stood down as Conservative Party leader on Friday. She is due to be replaced as prime minister in the summer once the ruling Conservative Party picks her successor.

Manufacturing output in April was also affected by a decline in orders for British-made goods compared with the previous month, which had seen a boost in purchases as buyers built up precautionary stocks ahead of March 29. Factory output overall shrank 3.9 percent in April compared with March.

The economy grew 0.3 percent in the three months through April, the ONS said, an annualized rate of 1.1 percent. That compares with growth of 0.5 percent the previous three months.

 

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