LONDON, 29 August 2018 – Sluggish business investment, declining goods exports to the EU and mixed signals from consumers are three indicators tracked by Global Counsel which show the UK economy is vulnerable to an upset in the Brexit negotiations. The outcome – and whether there is a deal or no deal – could reset business and consumer confidence and with that see the UK’s unspectacular growth either accelerate or stall. The UK’s Brexit economy is at a turning point, but which way will it turn?
With just six months before the UK leaves the EU, Global Counsel has reassessed the state of the economy in its latest Brexit Dashboard, which tracks a balanced set of 15 indicators. In Q3 this year the dashboard shows many indicators moving further into the red, suggesting the economy is performing worse than in the years before the referendum vote.
- Consumers – Retail sales are the brightest spot on the dashboard, picking up sharply in recent months, helped by the sunshine and the World Cup. But spending on durables is now falling for the first time in several years, suggesting households are nervous about larger purchases as Brexit nears.
- Investment - Business investment remains sluggish and even fell at the start of the year. There are clear signs that Brexit is seen as a risk factor that is holding back investment at levels which mean it is unable to power the economy and is now a drag on productivity growth.
- Exports - The growth rate of goods exports to the EU has seen a steady decline and is now firmly negative. The Bank of England reckons this could take 0.6 percentage points from growth in Q2. Even if temporary factors are partly to blame, it is a warning sign that the UK economy is vulnerable to Brexit.
Gregor Irwin, Global Counsel Chief Economist and lead author of the report said:
“The economy is at a turning point, as Brexit uncertainty rises and the deadline for a withdrawal deal nears. Households and businesses are equally cautious and both manufacturing and services are vulnerable to a change in sentiment. The outcome of the Brexit negotiations could make or break confidence in the economy and determine which way the economy turns in the coming months."
The full pdf version of the quarterly report is available here
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Global Counsel helps businesses across a wide range of sectors anticipate the way in which politics, regulation and public policymaking create both risk and opportunity. Our advisers can interpret and anticipate the impacts of policy initiatives for businesses and other stakeholders, and help clients develop plans for shaping and adapting to them. Global Counsel advisers in Brussels and London, and our wider network of former policymakers in EU capitals, represent experience in every area of public policy and political communications. With sector specialisms including manufacturing, energy, financial services, technology, media and telecommunications, our practice leads combine decades of experience working with the European Commission, European Parliament and member states in the EU Council.