“Greater-than-evens chance” of recession as prop of consumer spending is removed, warn experts

The chances of Britain falling into recession are now more likely than not, a leading consultancy has warned.

The UK has defied expectations it would fall into a recession following the Brexit vote. This was due to consumer spending propping up the economy, according to Fathom Consulting.

But, Fathom wrote, “the tide has turned”.

With real wages failing to grow and the General Election result “reigniting concerns about the country’s economic prospects”, the consultancy said a technical recession in the next year was on the cards.

Read more: Sterling dips as inflation falls sharply to 2.6 per cent

An unexpected dip in inflation was revealed earlier this week. Lower oil and food prices led to inflation falling from 2.9 per cent in May to 2.6 per cent in June. Fathom labelled the fall “temporary in nature”.

“We believe that there is now a greater-than-evens chance of a technical recession in the UK over the next year,” the consultancy concluded.

Meanwhile, Big Four accountancy firm EY said in its second quarter profit warnings analysis that a low number of profit warnings masked a “challenging outlook for UK businesses”.

There were 45 profit warnings in the three months to June 2017. But the retail sector posted its highest second quarter of warnings since 2011.

EY wrote: “Economic and political unknowns are also starting to hit business confidence and decision making.

The UK economy has proven itself robust in the last year and will continue to grow at a moderated pace. Growth in the global economy and weaker pound should help exports. But the next 12 months undoubtedly look trickier to navigate.

Read more: Slowest UK economic growth since 2012 predicted as inflation hits consumers

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