'UK economy started to contract in July'

A steel plant in Port Talbot, south Wales, Britain, on March 30, 2016.
A steel plant in Port Talbot, south Wales, Britain, on March 30, 2016.PHOTO: EPA

LONDON (Reuters) - Britain's economy started to shrink the month following the vote to leave the European Union, according to a forecast from the National Institute of Economic and Social Research on Tuesday.

Britain's economy contracted around 0.2 per cent last month, NIESR estimated, pushing down quarterly growth in the three months to July to 0.3 per cent from 0.6 per cent in the three months to June.

"The month-on-month profile suggests that the third quarter has got off to a weak start, with output declining in July," NIESR research fellow James Warren said.

"Our estimates suggest that there is around an evens chance of a technical recession by the end of 2017," added Mr Warren, repeating NIESR's view in its economic outlook last week, when it chopped its forecasts for growth this year and next.

Business surveys suggest corporate activity has contracted sharply since the June 23 referendum, although evidence of a slowdown in consumer spending is fairly patchy.