Economy shrinks by 0.4% in April.

Official figures from the Office of National Statistics (ONS) show the economy shrank by 0.4% in April.

Caused by a “dramatic” fall in car production and an easing of stockpiling by manufacturers. The contraction meant growth for the three months to April slowed to 0.3%.

Factory shutdowns designed to cope with disruption from a March Brexit slashed UK car production in April by nearly half, the industry said last month.

BMW’s Mini factory in Oxford brought forward its summer maintenance shutdown to April to minimise any disruption surrounding Brexit. Other manufacturers’ annual stoppages were also brought forward.

Economy showing the signs of Brexit ‘Hangover’

The economy had seen a spurt of growth in the run-up to the proposed March date for the UK leaving the European Union, as manufacturers stockpiled parts, raw materials and goods in the anticipation of holdups at the border.

After the Brexit deadline was extended to October, it suffered the reverse effects as these supply reserves were used up and fewer purchases were made.

Yael Selfin, chief economist at accountants KPMG UK said:

“The hangover that’s followed the UK’s original exit date is proving stronger than anticipated.”

“Today’s figures signal the UK economy is likely to experience more subdued growth for the rest of the year, marred by Brexit uncertainty.”

ONS statistician Rob Kent-Smith said:

“Growth showed some weakening across the latest three months, with the economy shrinking in the month of April mainly due to a dramatic fall in car production, with uncertainty ahead of the UK’s original EU departure date leading to planned shutdowns.

“There was also widespread weakness across manufacturing in April, as the boost from the early completion of orders ahead of the UK’s original EU departure date has faded.”

NIESR: UK economy will contract this quarter.

The National Institute of Economic and Social Research is Britain’s longest established independent research institute, founded in 1938

The think tank has warned that the UK economy may shrink by 0.2% in the current quarter.

That would put Britain half-way into a Brexit-induced recession.

NIESR fears that there hasn’t been a “meaningful” recovery in May, following the 0.4% drop in GDP in April revealed this morning. So if manufacturing and construction keep shrinking, the overall economy could contract this quarter — having grown by 0.5% in January-March.

Garry Young, head of macroeconomic modelling and forecasting, said:

“The UK economy is on course to contract by 0.2% in the second quarter.”

“The latest GDP data were weaker than expected, partly reflecting shifts in production around the original Brexit departure date, including a 24% fall in car manufacturing.”

“The underlying picture is also quite weak, with Brexit-related uncertainty at home and trade tensions abroad dragging on investment spending and economic growth”

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