U.K. GDP Shrunk in August as Industrial Output, COVID-Related Health Work Slumped

By Geoffrey Smith 

Investing.com -- The U.K. economy contracted in August, adding more pressure on to the government and Bank of England as they try to plot a way out of a looming crisis.

Manufacturing output and construction both stuttered, while the health and leisure sectors weakened sharply. Overall, gross domestic product fell 0.3% from July, while the less volatile series showing quarter-on-quarter developments fell by the same amount. 

The numbers come a day after the Bank of England was again forced to intervene in the U.K. government bond markets to stop a liquidity crisis in the country's pension industry, which was triggered by the sharp rise in Gilt yields after the new government of Liz Truss announced a massive program of unfunded tax cuts and energy subsidies. 

In a speech on the sidelines of the International Monetary Fund's fall meeting late on Monday, Bank of England Governor Andrew Bailey had said that the Bank will end its outright purchases of Gilts on Friday, and warned pension funds to have exited unsustainable positions by then.

The pound, which had slumped after Bailey's speech, recovered some of its losses when the Financial Times reported that the Bank may after all be open to extending its deadline. The pound then crawled back above $1.10 in response to the data.