Britain on the cusp of recession

Property developments are pictured in the City of London. Britain’s economy unexpectedly shrank in the second quarter of this year on Brexit turmoil, official data showed, placing the country on the verge of recession. (AFP)
Updated 11 August 2019

Britain on the cusp of recession

  • Dramatic slump in construction and manufacturing sectors blamed for fall in UK gross domestic product

LONDON: Britain’s economy unexpectedly shrank in the second quarter of the year on Brexit turmoil, official data showed, placing the country on the verge of recession and sending the pound tumbling to a 2.5-year low.
Gross domestic product (GDP) fell 0.2 percent in the April-June period, the first time the economy has contracted in almost seven years, the Office for National Statistics (ONS) said in a statement, blaming a dramatic slump in the construction and manufacturing sectors.
The data, which was worse than market expectations for zero growth and also reflects global economic strains, sent the pound diving to $1.2056 — the lowest level since early 2017.
Another contraction in the current third quarter would put Britain in an official recession, ahead of the nation’s expected withdrawal from the EU at the end of October.
“The latest data reveal an economy in decline and skirting with recession as headwinds from slower global economic growth are exacerbated by Brexit-related paralysis,” said IHS Markit economist Chris Williamson.
The result contrasted with 0.5-percent expansion in the first quarter, when activity was boosted by companies stockpiling ahead of Brexit.
Output was buoyed in the first three months of 2019 because Britain had initially been scheduled to leave the EU at the end of March.
“GDP contracted in the second quarter for the first time since 2012 after robust growth in the first quarter,” said Rob Kent Smith, ONS head of GDP.
“Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK’s original departure date from the EU.
“The construction sector also weakened after a buoyant beginning to the year, while the often-dominant service sector delivered virtually no growth at all,” he added.
British Prime Minister Boris Johnson replaced Theresa May after winning the Conservatives’ leadership contest on a pledge to take Britain out of the bloc on Oct. 31 with or without a divorce deal.

The latest data reveal an economy in decline and skirting with recession as headwinds from slower global economic growth are exacerbated by Brexit-related paralysis

Chris Williamson, IHS Markit economist

Brexiteer Johnson, a pivotal “Leave” campaigner in the 2016 EU exit referendum, has repeatedly insisted that Britain can make an economic success of Brexit.
Chancellor of the Exchequer Sajid Javid on Friday said that the global economy was slowing, but highlighted other recent positive data for the UK.
“This is a challenging period across the global economy, with growth slowing in many countries,” said Javid.
“But the fundamentals of the British economy are strong — wages are growing, employment is at a record high and we’re forecast to grow faster than Germany, Italy and Japan this year,” he added.
“The government is determined to provide certainty to people and businesses on Brexit — that’s why we are clear that the UK is leaving the EU on Oct. 31.”
The government’s official forecaster last month warned that Britain would slide into a year-long recession should it leave the EU without a deal.
Bank of England Gov. Mark Carney recently warned that a no-deal Brexit could undermine entire sectors of the economy such as the car industry and farming.
“The latest look at the UK economy makes for pretty grim viewing,” XTB analyst David Cheetham said in reference to Friday’s data.
“Given the growing threat of a no-deal Brexit that looms menacingly overhead, it would not be at all surprising if the current quarter also shows a contraction — therefore meeting the standard definition of a recession.”
May stepped down after failing to get her EU-divorce deal through parliament and being forced to delay Brexit twice.


Pakistan seeks explanation from oil marketing companies amid looming fuel crisis

Updated 03 June 2020

Pakistan seeks explanation from oil marketing companies amid looming fuel crisis

  • Shell Pakistan, Total-Parco, and Attock Petroleum given show cause notices on failing to maintain stocks — OGRA
  • Retailers say about 40 percent fuel supply was disrupted after the government slashed prices of petroleum products

KARACHI: Pakistan’s Oil and Gas Regulatory Authority (OGRA) on Wednesday sought an explanation from three oil marketing companies for failing to maintain their reserves as consumers continued to suffer due to a shortage of gasoline across the country after the government decided to ease lockdown restrictions.
“We have taken notice of the situation and engaged a third party to probe the situation. We have also issued show cause notices wherever we felt the stocks were not properly available,” OGRA’s senior executive director Imran Ghaznavi told Arab News, adding: “We have issued notices to Shell, Total-Parco, and Attock Petroleum.”
According to a statement released by the Ministry of Finance, the country’s Economic Coordination Committee (ECC) also discussed the shortage of petrol in some cities on Wednesday and instructed the Ministry of Energy, Competition Commission of Pakistan and OGRA to ensure that the requisite stocks were maintained by oil marketing companies and the supply to the fuel stations across the country remained regular and intact throughout the month.
The ECC chairman, Dr. Abdul Hafeez Shaikh, took a stern view of the reported petrol shortage, directing all the relevant government institutions to immediately let him know if the situation worsened any further.
Pakistan’s petroleum consumers suffered this week as many petrol station stopped supplying fuel while others faced panic buying and long queues. Retailers say about 40 percent of the supply was disrupted after the prices of fuel were slashed by the government.
“Around 40 percent petrol stations are not supplying fuel to the consumers and this situation is persisting across the country,” Sameer Najmul Hasan, chairman of All Pakistan Petrol Retailers’ Association, told Arab News.
The situation emerged when the country’s oil marketing companies failed to maintain their required stocks for 20 days under a local law.
Retailers say the demand for petrol and diesel surged after the government announced to relax the COVID-19 lockdown and allowed public transportation to resume after almost two months of suspension.
“The oil marketing companies mostly keep stocks of petrol and diesel through imports and keep inventories toward the lower side. As the lockdown was eased and public transportation was resumed, the demand for fuel surged in the country,” Hasan noted.
Goods transporters said they were also facing problem due to the shortage of diesel, warning that the situation could have larger implications for the country’s economy if it was not duly addressed.
“We are trying to manage at present, mostly by relying on stations owned and operated by small companies, but the surge in demand is depleting the stocks and the situation is getting out of hand,” Rana Aslam, president of Karachi Goods Carrier, told Arab News.
Transporters warn that the supply of essential goods across the country will also be suspended if the situation is not properly handled.
“When oil prices are increased, the orders are immediately implemented,” Aslam added. “But when these prices are dropped, people are deprived of the benefits. The situation may also hamper the supply of essential items across the country amid the COVID-19 pandemic.”
The fuel shortage emerged despite the assurances of the petroleum division that the country had sufficient stocks of gasoline to meet the domestic requirement
OGRA officials said the oil marketing companies were legally bound to respond to the government’s call to maintain sufficient stocks of petroleum products to avoid any emergency situation. The matter is also expected to be taken up in a high level meeting on Thursday.
“A meeting is taking place tomorrow at the petroleum division and the matter will be taken up in that meeting,” Ghaznavi informed, adding: “The companies are legally obliged to overcome this shortage forthwith.”
Pakistan’s average monthly consumption of petrol before the coronavirus pandemic remained between 500,000 metric tons and 600,000 metric tons. However, the level of consumption and demand declined due to the COVID-19 outbreak. The imports of petroleum products also declined by 20 percent to $9.5 billion during July-April 2019-20 mainly due to virus-related lockdown.
Pakistan’s annual consumption of petroleum was around 19.35 million metric tons in FY19. Around 42 percent of the country’s demand was met through imported products while the remaining 58 percent was locally refined, according to the country’s credit rating agency, PACRA.