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Recession fears rising

The contraction in GDP in Q2 together with the partial inversion of the gilt yield curve has raised concerns that a recession in the UK is on the way if it’s not already here. We suspect that the UK will avoid a recession before Brexit. But what happens with Brexit on 31st October will ultimately determine whether there is a recession or not. For what it’s worth, we place the chances of a no deal on 31st October at about 40%. That suggests there may be a similar chance of a recession at the turn of the year.

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