The UK economy is shrinking for the first time in seven years as uncertainties pile up over Brexit and global growth slows.
The pound fell 0.2% against the dollar on Friday to just above $1.21. It dropped 0.3% against the euro.
GDP for the three months ended June contracted 0.2% compared to the previous quarter, the Office for National Statistics said Friday. Experts had expected growth to be flat.
The biggest drag on the economy came from a drop in manufacturing output, which caused the production sector to shrink 1.4%.
“Contraction in the second quarter is a rude awakening … and confirmation of the concerns businesses have been expressing about the economy,” said Tej Parikh, chief economist at the Institute of Directors, a business lobby.
The contraction comes amid rising fears that Britain could crash out of the European Union.
Prime Minister Boris Johnson has committed to leaving the bloc on October 31 even without an exit agreement in place to protect trade. That would plunge the economy into recession, according to government forecasts.
The UK Office of Budget Responsibility, the government’s budget watchdog, has warned that a disorderly Brexit would cause UK stock markets to fall 5%, while the pound would plummet 10%. GDP would shrink by 2% by the end of 2020, it estimates.