Recession Is Staring Britain in the Face, Fathom Says

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  • Says economy to contract in first and second quarters
  • Report follows Bank of England’s first rate increase in decade

The U.K. may be on track for a recession next year, according to Fathom Economics.

That’s likely to take the form of a contraction in output in the first and second quarters of 2018, economist Andrew Brigden said in a report Thursday. Analysts in a Bloomberg survey see growth of 0.3 percent and 0.4 percent in the same period.

“We may be more bearish than the consensus, but of course that does not mean that we are wrong,” Brigden said. “Economists as a group are not very good at spotting recessions, even when one is staring them in the face.”

The Bank of England -- which raised interest rates from a record-low 0.25 percent this month -- is also expecting sluggish, but positive, growth in the coming quarters. Critics of its decision said tightening policy with Brexit on the horizon is questionable, or could even be a mistake.

He also pointed out that on the eve of the financial crisis, the word “recession” was not mentioned at all in the BOE’s Inflation Report, the document accompanying its forecasts. The IMF, OECD and private-sector analysts also failed to predict any contraction.

On the other hand, many had predicted a recession would follow if the U.K. voted for Brexit, a forecast which also never came to pass. Divorce talks with the European Union have so far been fraught with stumbling blocks, and some officials are floating the idea of exit from the bloc being delayed beyond March 2019.

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