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UK economy shrank in July, says think tank

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The UK economy contracted in July, the first month after the EU ‘leave’ vote, according to the National Institute of Economic and Social Research (NIESR).

Estimates from the think tank suggest GDP slowed to 0.3% in the three months to July, down from growth of 0.6% in the three months ending in June.

While the think tank said “monthly data was volatile” and caution should be taken about over-interpreting developments in the fundamentals of the economy from any single month, it still warned there was an ‘evens’ chance of the UK entering recession by the end of next year.

James Warren, research fellow at NIESR, said: “We estimate that in the three months to July the UK economy grew by 0.3%, a marked economic slowdown. The month on month profile suggests that the third quarter has got off to a weak start, with output declining in July. Our estimates suggest that there is around an evens chance of a technical recession by the end of 2017.”

Last week, NIESR said UK GDP was expected to grow by 1.7% this year, but will deteriorate to just 1% in 2017.

The UK’s decision to leave the EU was the main reason behind this lowering of expectations, NIESR said, with the UK likely to have limited access to services markets as a result of the referendum outcome, leading to greater fragmentation of EU wholesale finance.

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