UK's economy may already in technical recession as Brexit looming

Britain's economic growth has stalled and there is around one-in-four chance that economy is already in a technical recession, the National Institute of Economic and Social Research (NIESR) said on Monday.

According to the London-based independent economics and finance think tank's GDP tracker, Britain's economy contracted 0.1 percent in 2019 Q2, partly because of car plant shutdown and turnaround in stock-building.

Meanwhile, the main service sector has slowed and surveys point to continued stagnation, representing a reasonable chance -- one in four -- that Britain already in a technical recession, NIESR warned.

NIESR noted there are three options appeared as Brexit cliff-edge is looming, including extend Article 50, leave with a deal and leave without a deal. First two options account for roughly 60 percent chance, have similar short-term implications.

In this case, if no-deal Brexit is avoided, NIESR expected British economic growth to be little above 1 percent in 2019 and 2020. The interest rate of the Bank of England would remain at 0.75 percent throughout this year before being raised to 1 percent in the second half of 2020.

On the other hand, under the no-deal Brexit scenario, NIESR saw the possibility of a "severe downturn" in the event of a disorderly no-deal Brexit. In addition, British economic growth expected to be around 0 percent in 2020 in the event of orderly no-deal Brexit, which means UK leaves EU in October with temporary contingency measures in place, by NIESR's definition.

Jagjit Chadha, Director of NIESR, said the new prime minister of Britain may have the backdrop on the economy that no longer provides obvious insulation against the case for hard Brexit.

"Whilst attention is often focused on the big questions of monetary and fiscal policies, the real business of government involves addressing matters such as the roads, schools, hospitals, housing, railways and broadband and it is becoming clear that progress has stalled," he said.