The economy has performed better than was expected since the vote in June 2016. But a lot of this has been through consumer spending, which is now being squeezed as inflation exceeds wage growth and disposable incomes are reduced. There is no doubt things have not panned out as badly as was feared but this does not mean we are on an upward trend.
There has been a slowdown and we are now at the bottom of the G7 growth league from being at the top before the vote. Growth in the first and second quarters was 0.2% and 0.3% respectively. The latest PMI Markitt survey shows construction activity (HERE) slowed in June and now another survey from the same company (HERE) shows the composite Purchasing Managers Index, which combines services, manufacturing and construction, edged down to a seven-month low of 53.6 in September.
This morning we learned that new car sales fell for the fifth month in a row, this time by 9.2% (HERE). If car sales are a barometer of the economy the needle is definitely dropping. DFS, the big furniture retailer has announced a drop in profits (HERE) amid what they call challenging conditions. Following this poor economic data the pound slipped again on the foreign exchanges (HERE).
The great surge in manufacturing that was supposed to come from the fall in Sterling has not materialised and according to Sky News, even an apparent spike in exports last year was actually the result of oversea investors pulling gold out of London (HERE). The article even suggests our exports to Europe are more than the 44% claimed during the campaign. If the gold that passes through London and which artificially inflates our export performance is removed, over 50% of goods and services go to the EU. And this doesn't include another 20% or so that goes to non EU countries with which the EU has a free trade deal.
So, Brexit will increase friction and barriers between us and the destination of around 70% of our exports. According to figures (HERE) total UK exports in 2016 were $408 billion, although this was a fall of 12.3% from 2015. So, the 70% that might be impacted by Brexit is about $280 billion.
We are leaving the EU to reduce the barriers and friction on the 30% of our exports which go to non-EU countries that don't have a FTA with Europe while increasing friction on the 70% that makes up the rest. If this looks stupid, it's because it is. Also, don't forget the extra friction on our imports from the EU as well!
Update: ONS data (HERE) shows that productivity, already well behind that of Germany and France actually got worse in the twelve months following the referendum. If there is one thing we need after Brexit it is to raise our game to the level of our international competitors - but we are going backwards.
Update: ONS data (HERE) shows that productivity, already well behind that of Germany and France actually got worse in the twelve months following the referendum. If there is one thing we need after Brexit it is to raise our game to the level of our international competitors - but we are going backwards.
