Happy in Cyprus wrote: ↑Sun Jun 24, 2018 6:49 pm
Still think Brexit was a good idea? Yeah, right
I think not many do think this anymore but don't dare to admit it maybe? Fool Britannia...
This is from the Economist:
The economy has slowed to a standstill, largely because of Brexit
Surveys from the second quarter of the year have not been encouraging
FOR some time Britain’s vote in June 2016 to leave the European Union appeared to be having little economic impact. Sterling slumped but GDP growth in the second half of 2016 was faster than in the first. Unemployment fell, rather than jumping, as most economists had feared. Yet the notion that the economy would escape Brexit uncertainty was always fantastical.
Britain’s economy has gone from a leader to a laggard internationally, as GDP growth has slowed sharply (see chart below). As The Economist went to press, the monetary-policy committee (MPC) of the Bank of England was expected to leave its benchmark interest rate on hold at 0.5%. The economy is deemed too weak to cope with higher borrowing costs.
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A few factors explained the economy’s outperformance in the immediate aftermath of the referendum. The government eased fiscal austerity. In August 2016 the Bank of England cut interest rates to 0.25%. Happily, around the same time the world economy entered its first synchronised upswing since the global financial crisis. Britain is an open economy. Its exporters have benefited from strong foreign demand, especially from the European Union, by far the country’s largest trading partner.
The economic impact of the vote for Brexit is turning out to be less of a sting and more of an ache. Sterling’s referendum-induced decline has made imports pricier. Annual inflation exceeded wage growth for most of 2017. Although inflation has fallen from its recent peak of 3.1%, real wages are still barely growing. Today the average employee’s pay packet is roughly 3% smaller than might reasonably have been expected in June 2016, when real wages were moving up. Brexiteers who emphasised how much Britain allegedly pays to the EU will be interested to learn that, across the whole economy, that adds up to around £350m a week in lost earnings. Growth in household spending, which accounts for some 60% of GDP, has slowed.
That has duly made its mark on overall economic growth. In the first quarter of 2018 GDP rose by just 0.1%, the slowest rate since 2012. Poor weather at the start of the year hit the construction industry but overall had only a “limited” effect on the economy, according to the national statistics office. Perhaps more importantly, the world economy is slowing. Britain’s exports have dropped for the past two quarters.
The MPC’s decision in November to reverse its post-referendum rate cut, which was motivated by a desire to bring inflation back down to its 2% target, has not helped matters. The prospect of rising borrowing costs may have made the public more cautious. More than half of Britons believe that a further tightening of monetary policy is on the way, the biggest share since 2011. Some households seem inclined to pay down debt or save, rather than spend. Business investment has stagnated, which may also reflect the fact that the moment when Britain is actually due to leave the EU is fast approaching.
Many economists are now wondering whether Britain is heading for outright recession. Some recent surveys have not been encouraging. After a strong performance in 2017, manufacturing output appears to be falling. Retail sales have picked up—but they are poorly correlated with overall consumer spending. All told, it does not seem pessimistic to expect quarterly GDP growth of a meagre 0.1-0.2% in the second quarter of 2018.
There is little chance of the economy bouncing back soon. Consumer confidence remains low. Businesses have only modest plans for investment in the coming months. In 2018-19 the government appears to be ramping austerity up again as it seeks to close its budget deficit despite a new promise to spend more on the health service. Britain seems to be trapped in a period of low growth. And Brexit has not even happened yet.
This article appeared in the Britain section of the print edition under the headline "An ache, not a sting"
