It’s been almost 9 months since the referendum, and as is expected of a close call referendum, the voice of the people is clearly halved along the middle of the British Political identity, and thus the Euroscepticism that has grown over decades of debates and research, suddenly turned into a nervous teenager, not sure of what to do where to go.
The spirit among the Leave EU supporters have been high through and through, despite initial knee jerk reaction by financial institutions, and many a analyst calling it the worst decision since the dawn of the kingdom
But a bit of skepticism has been observed creeping in since the crash of the Pound Sterling, and although the Pound has recovered a lot since then, it has never reached it former position and is staying at a regular 10% to 15% lower than it’s pre-referendum value compared to the Dollar and the Euro.
But how do we actually fare? where do we stand now? what are the analysts and financial houses saying now? where is Britain’s Industry standing?
The Article 50 is being invoked while the labour is still brawling, infighting between Jeremy Corbyn and Tony Blair is hot news, as Blair commented that the Labour should reconsider Brexit stance.
So while Prime Minister Theresa May formally triggers Article 50 of the Lisbon Treaty, which is now expected to be on March 29, and Scotland posing a Brexit party spoiler, what is the direction UK economy is headed at?
To discuss that we should first consider the fact that whatever effect we discuss now, that is not the effect of Brexit, that’ll start to show up when the separation with EU is complete, and would depend on the trade agreements Britain bags with the EU countries.
The effect on Britain and its economy and the effect on the currency is the effect of trust, the effect of deniability or the opposite of Britain’s importance in the geographical context of Europe and globally.
For whatever effect we see, it would either mean that Britain’s decision to leave EU doesn’t bother other countries and institutions at all, and the negative impact of falling alone on the global market, and the exasperation induced punitive reactions of other countries moving business away from Britain would indicate or forecast the economic future of the British people post the actual exit two years later.
Where as, if nothing major is noted to have happened over the last 9 months and the coming months, saving for a short knee jerk reaction, that would of course mean, the exit is going to auger well for Britain.
For now, what can be said straight away is that despite the fact that before the referendum last June, many economists produced gloomy forecasts which have since been proved wrong. Consumers’ confidence has not suffered, and by and large, things have gone on as before.
“The UK economy grew by more than previously reported in the final three months of 2016, according to the latest official estimate.” – BBC
According to the Office for National Statistics (ONS), Gross domestic product (GDP) increased by 0.7%, up from 0.6%
The upward revision is mainly due to the manufacturing industry having done better than thought.
The ONS also stated that there is a slowdown in business investment, and business investment fell by a percent compared to the quarter ending in September 2016, but the overall pattern amidst this uncertainty is quite promising for the pro-Brexit British.
Growth in the UK’s service sector has seen an impressive upward curve and ended in a first low in five months, this February.
“The Markit/CIPS purchasing managers’ index (PMI) for services fell to 53.3, down from 54.5 in January. “
But note that overall it remained above 50 althrough, which is the threshold separating growth from contraction.
the UK’s independent budget watchdog, the Office for Budget Responsibility (OBR) has recently revised its growth forecast for this year from 1.4% to 2%.
Economists that predicted negative growth seem to have forgotten to take the possible corrective actions of the Bank of England in their metrices to boost the economy, and forgot that since the Bank of England have not had cut interest rates once since 2009, they had the opportunity of cutting interest rates from 0.5% to 0.25% in August 2016 – the first reduction in the cost of borrowing since 2009 – taking UK rates to a new record low.
Interest rates will stay low for a while, and with tax breaks announced in the budget this month, it is more likely that the Bank would keep the interest rates low for a while now, so that growth is not affected.
“UK house prices accelerated in February rising by 4.5% in a year, according to the Nationwide, and by 5.1%, according to the Halifax.” – BBC
Supported by a steady economy and a growing industrial sector and a steady expanding employment, Britain’s housing demand kept growing too.
Another important factor that drove the British population to vote for Brexit was migration, along with other economic factors. And if we look at this straight from BBC
“Net migration to the UK dropped to 273,000 in the year to September 2016, down 49,000 from the previous year.
The Office for National Statistics said it was the first time in two years the balance of people arriving and leaving the UK had dipped below 300,000.
Published in February, this is the first data to include migration estimates following the EU referendum.
Immigration was estimated to be 596,000; of these 268,000 were EU citizens, 257,000 non-EU citizens and 71,000 were British citizens.
Some 323,000 people are thought to have left the UK in the same period, up by 26,000 on the previous year.
Of these, 103,000 were EU citizens, 93,000 non-EU citizens and 128,000 British citizens.”
The weaker pound augured well for exporters
Britain has long been in a trade deficit, with import being way ahead of export, but the weaker pound has provided a boost to the manufacturing industry and exports have increased.
“UK exports and imports both rose in January – by £400m and £300m respectively – leaving the trade deficit in goods and services steady and unchanged from December 2016 at £2.0bn, the ONS said.” – BBC
Although they also mention that the underlying trend is further widening of the trade deficit, but a positive show is already too promising for the British population when faced with much much bleaker forecasts.
Effect on the Service Industry
Services, the other important factor that was of most serious concern, Britain exports more services than goods and if the large financial institutions and other service industry top corporations shift office from UK to continental Europe, the effect would be disastrous. But so far, the trend predicted has not shown up and it seems as of now, people are not in a hurry to shift offices off shore.
“The UK economy is set for a strong 2017 and could outperform other developed nations, despite uncertainty surrounding Brexit, according to bosses at some of the world’s biggest finance firms.
More than half of those surveyed believe that the nation’s economy will remain resilient in 2017, and 22 per cent expect it to improve compared to 2016. Three quarters (76 per cent) predicted that UK economic growth will be in line with, or outpace, the average of the G7 group of advanced nations this year.” – The Independent, UK
Lloyds canvassed for the views of more than 120 boardroom and senior executives from global banks, challenger banks, asset managers and insurers, with combined revenue of around £530bn. The outcome doesn’t predict any negative impact so far either.
For us, the small to medium manufacturer, exports as we have noted earlier, has only seen a positive trend, although importing machinery has cost us more, but holding off delivery and payment post Brexit until the pound has settled a bit helped us reduce the difference we were supposed to pay for machinery import orders placed before the Brexit. Overall, for us, and for many of you, the post Brexit scenario is far from as Apocalyptic as was predicted, and instead there seem to be some hope of a good future outside EU as all pro Brexit British had voted for.