Is the U.K. headed for a recession?

The headaches of negotiating Brexit
The headaches of negotiating Brexit

Is a recession looming in Britain?

That's the question being asked in hushed voices across the U.K. following a barrage of disappointing economic reports.

Here's the evidence: Brits are saving the smallest share of disposable income in over 50 years. Credit card borrowing is at record high. Wages are stagnating and consumer confidence is crashing.

It could be enough to push an already weak economy into the red.

Data published Friday confirmed the economy grew just 0.2% in the first three months of the year, cementing Britain's position as the slowest growing economy in the European Union.

"The disappointing data is stacking up," said IHS Markit economist Raj Badiani. "It's almost a question of who is going to be the first brave economist to say we might see stagnation."

The behavior of households is particularly worrying because consumption makes up a big part of Britain's economy.

Azad Zangana, senior European economist at Schroders, said that data published Friday suggest that families are now borrowing or using past savings to cover their expenses.

"This is not sustainable in the medium-term and should lead to an even greater slowdown in household consumption," said Zangana. "This greatly increases the risk of recession."

Related: It's official. Business isn't investing in Britain.

Other economists are less worried about the savings data, arguing that tax changes could be responsible for the weak report.

"While there are some signs that spending growth rests on shaky foundations, it is probably not quite as unsustainable as it looks," said Paul Hollingsworth of Capital Economics."We don't think that it is a sign that consumer spending is on the cusp of a dramatic slowdown."

Still, observers are watching closely to see if consumers and businesses grow more uneasy as Britain's divorce negotiations with the EU pick up speed.

"There is a large amount of business investment that is being postponed until business can see more clearly what the likely outcome of [Brexit] is," Treasury chief Philip Hammond said last week.

Related: Europe is growing faster than Brexit Britain (For real!)

Corporate leaders are most anxious about a scenario in which Britain crashes out of the EU without a deal. They would face new trade barriers and huge amounts of red tape.

Bank of England Governor Mark Carney also raised warning flags last week. He said that Britain is in a vulnerable position because it imports more goods and services than it exports.

"The U.K. relies on the kindness of strangers at a time when risks to trade, investment, and financial fragmentation have increased," he said.

Badiani said that second quarter GDP data will provide a much better look at where the economy is headed.

"If it stays at 0.2% or goes lower that that, we will have very strong chance of growth disappearing completely this year and next," he said. "Once you get into the mindset that a recession is inevitable, it hits confidence even more and you're there."

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