UK ECONOMY

Intro: Whichever way we measure it, economic growth in the UK is not looking particularly good

It would not be unassuming to believe that the UK citizen has become confused or for admitting to bafflement at the array of economic data that has been released regarding the impact of the vote to leave the European Union.

The most recent came at the end of last week from the IHS Markit’s Purchasing Managers’ Index which indicates that Britain’s decision to leave the EU has led to a ‘dramatic deterioration’ in economic activity, not seen since the aftermath of the 2008 financial crisis.

The data shows a fall in both manufacturing and service sectors and is described as the first significant set of data measuring business reaction to the referendum result. The figures displayed in PMI surveys are generally viewed as being reliable and an authoritative indicator of economic predictions.

This outlook came just after the IMF’s World Economic Outlook report slashed its growth forecasts, saying its prediction for the UK in 2017 was now a 1.3 per cent cut, down from the 2.2 per cent.

But there have been contradictory statements. The Bank of England admitted it saw ‘no evidence’ of a sharp economic slowdown and positive employment figures in the UK showed record numbers of people in work.

And perhaps in a desperate attempt to glimpse and portray a silver lining, it was reported that Britain was undergoing a staycation boom, with the tourism industry in particular set to reap the benefits of millions of people now choosing to holiday at home rather than travelling abroad thanks to the weakness of pound sterling.

The first point to consider is that predictions are just that, a prediction or an estimate on the economic outlook. And indicators only say how people think they might act; in these uncertain times such sets of data are more of a gamble than ever.

It is probably much better to concentrate on what has actually happened, although it is still very early to see all the consequences and implications coming through in the data.

In the first half of 2016, figures show that the global economy did better than expected, with stronger than forecasted growth in the Eurozone area and Japan, as well as a partial recovery in commodity prices.

The fall of the pound has already had an effect, making companies in the UK more attractive for takeover by foreign firms. ARM Holdings, one of the UK’s biggest technology companies, based in Cambridge, is to be bought by Japan’s Softbank in a £24 billion deal. Stirling-based Supaglass, the UK’s largest independent glass wool maker, is set to be purchased by one of Russia’s largest roofing and insulation groups in a deal reputedly worth around £8 million.

According to figures compiled by the chief statistician in Scotland, there was no growth in the Scottish economy in the first three months of this year. Overall, however, UK GDP grew by 0.4 per cent over the same period.

The expression ‘swings and roundabouts’ could have been coined to describe the economy. It undoubtedly varies and no-one can be certain of any set of predictions: many factors which will affect the British economy are beyond are control and not affected by Brexit at all.

Notwithstanding, though, any reasonable prudent or objective view would have to conclude that the prospects for UK growth are not looking particularly good either for the short or medium-term.