• Video report by ITV News Economics Editor Joel Hills

Chancellor Sajid Javid has dismissed fears of a recession after the UK's economy shrunk for the first time in seven years.

Speaking to ITV News' Business Editor Joel Hills, Mr Javid said the "fundamentals" of the UK economy were strong despite 0.2 per cent negative growth in the second quarter of 2019.

Mr Javid added the government's spending pledges would be funded by increased growth - despite the contraction this quarter.

"I do not expect a recession at all. It's not just what I think, there is not a single leading forecaster out there that expects a recession," Mr Javid said.

"The Bank of England, they're independent, they do not expect a recession."

Despite the prospect of a looming recession if the UK suffers another consecutive quarter of economic decline, the Chancellor would not be drawn on the possibility that a no deal Brexit could spark a recession, saying there would be "plenty of forecasts" later in the year.

He said: "What I am clear on is that we can prepare for a no deal, and that's why I've allocated more funding, an extra £2 billion of funding, to do just that."

The Chancellor added: "The IMF forecasts says not only will we grow this year, but we will grow faster than Germany, than Italy, than Japan, and it is that economic growth that allows us to make the investments we want to see.

"You will see that because of the strength in our underlying economy that we will be able to meet the needs of the British people.

"The prime minister has set out, and I absolutely agree with him, those priorities around NHS, on policing, on schools, and you will see that we can more than afford that.

"The money is coming from the hard work of the British people. Our economy has grown 19 per cent since 2010... our economy is still growing. We've got more people in employment than before which shows you the strength of our economy, and that's what's paying for this investment."

The Conservative MP was also quizzed on previous remarks he made before the 2016 EU referendum, where he claimed a vote to leave would trigger a decade of economic decline.

Mr Javid cited preparations for Brexit as a factor behind why he had changed his mind, saying: "I am confident today, that as I sit here, that we can get through no deal and be stronger."

However he admitted there would be "challenges" to certain industries and sectors if the UK left with no deal.

"I'm not planning on any damage to the economy, and that's whether we leave with a deal or with no deal," the Chancellor said.

From April to June this year, the UK's gross domestic product (GDP) fell by 0.2 per cent, the Office for National Statistics revealed. Credit: PA

The negative growth has come as a shock to Bank of England forecasters, who had projected the economy to stagnate on 0 per cent growth.

Rob Kent Smith, head of GDP at the ONS, said: “GDP contracted in the second quarter for the first time since 2012 after robust growth in the first quarter.

“Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK’s original departure date from the EU.

“The construction sector also weakened after a buoyant beginning to the year, while the often-dominant service sector delivered virtually no growth at all.”

Car factory closures led to a 5.2 per cent dip in the manufacturing sector. Credit: PA

The contraction in the UK economy comes after 0.5 per cent growth in the previous quarter.

Manufacturing recorded its highest pickup since the 1980s between January and March.

The ONS said companies had been building up additional goods in the first quarter in anticipation of the original Brexit deadline, set in March.

But now that Brexit has been pushed back until October 31, firms which spent the first three months stockpiling look to have been using up their stores before building up new reserves.

Chancellor Sajid Javid played down the latest figures, saying the "fundamentals" of the UK economy were "strong.

He said: “This is a challenging period across the global economy, with growth slowing in many countries.

"But the fundamentals of the British economy are strong – wages are growing, employment is at a record high and we’re forecast to grow faster than Germany, Italy and Japan this year.

“The government is determined to provide certainty to people and businesses on Brexit – that’s why we are clear that the UK is leaving the EU on 31 October.

“I’ve announced an accelerated Spending Round so ministers can focus on delivering Brexit, while also delivering the investment we promised in priority areas like schools, police and our NHS.”

  • What do the figures show?

Production output fell by 1.4 per cent, while manufacturing declined by 2.3 per cent.

Manufacturing sector also dropped thanks to transport equipment, which dipped by 5.2 per cent due to annual car factory closures. This in part may have been brought forward as businesses prepare for possible Brexit disruption

Construction output was also weaker, falling by 1.3 per cent.

This compared with a 1.4 per cent increase in the first quarter, with the quarterly decline largely reflecting a six per cent drop in repair and maintenance work.

The service sector, which includes retail, banks, computer services, media, suffered its weakest quarter in three years.

Typically a driving for the UK economy, this only saw a 0.1 per cent increase. In comparison to the same quarter last year, GDP was up at 1.2 per cent.

The ONS data dump also showed that the UK's trade deficit narrowed by £16 billion to £4.3 billion in the quarter, as the level of imported goods declined following sharp rises in the first three months of the year.

  • Watch Joel Hills' full interview Sajid Javid on our Youtube channel