The UK's finance minister has signalled British fiscal policy may need to be ''reset'' in the wake of the Brexit vote, as a survey shows the economy is shrinking. What might be ahead for the UK - and is a recession imminent? Kirsty Basset reports.
A month on from Britain's decision to leave the EU - and confidence in the economy appears to be crumbling. That's according to a flash Markit survey of purchasing managers, which saw the biggest drop in its 20 year history. And suggests the UK economy is shrinking at a faster rate than at any time since the aftermath of the global financial crisis. But analysts say it might not yet paint the full picture and will be waiting to see what future readings reveal. (SOUNDBITE)(English) IG MARKET ANALYST CHRIS BEAUCHAMP SAYING: "If you start to see a rebound, if the weakness in sterling starts to promote other improvements in the economy, maybe things won't look quite as grim as they do this morning. Of course it's only one piece of data. One swallow does not a summer make and so on. So I think we should be slightly cautious before we start predicting doom and gloom for the UK ahead." New Finance Minister Philip Hammond, in China for a G20 meeting, will also be paying attention. He says the UK's fiscal policy may need to be "reset," depending on what happens. But a Reuters poll of economists is predicting recesssion, sometime in the coming year. (SOUNDBITE)(English) IG MARKET ANALYST CHRIS BEAUCHAMP SAYING: "The question is now of course how deep will that recession be, how long will it last and what will the government and the Bank of England do in tandem to really combat that. And of course those are questions that are yet to be answered." The Bank of England's Monetary Policy Committee meets next month, and economists widely expect interest rates to be cut by 25 basis points in an effort to combat the downturn.