UK economic activity has remained lacklustre at best in recent months, alongside a weakening in the housing market, consumption and financial conditions, Moody’s Investors Service said in its latest Brexit Monitor.
“The UK economy contracted in the second quarter of this year, the first decline since 2012,” said Colin Ellis, Moody’s Managing Director – Chief Credit Officer EMEA and co-author of the Brexit Monitor. “In our view, if no Brexit deal is reached between the UK and the European Union, the UK economy could suffer a significant and persistent loss in output.”
UK manufacturing and construction PMIs have fallen to their lowest levels since 2013 and 2009 respectively. However, retail sales volumes and activity have both stabilized.
Capital investment and investment intentions have contracted further in 2019, while exports and the trade balance have been volatile.
The risk of a credit negative no-deal Brexit has increased in recent months. Further delay to the UK’s withdrawal from the EU prolongs uncertainty and does not resolve the final outcome. A no-deal Brexit would have credit negative implications for a number of debt issuers.