Post-referendum economic uncertainty has been further highlighted this week in a raft of reports and projections. With forecasts of recession and budget black holes, the Brexit that Leavers promised seems a long way away, rather the latest economic news shows that so-called “Project Fear” is increasingly “Project Uncomfortable Truths”.
Here are seven reports and estimates released this week:
1. The economic benefits of single market access without EU membership would fall far short of the benefits of being a member of the single market according to a report published earlier this week by the Institute for Fiscal Studies. It found that membership of the single market adds an extra 4 per cent to the UK’s GDP, and alternatives would not compensate for loss of membership. Though it’s still unclear what Brexit actually means, it is clear withdrawing from the single market would come at a huge cost.
2. A survey of top economists suggests Britain is on the brink of a mild recession, with forecasts indicating the UK economy will contract both this quarter and next. Despite Brexiteers’ eagerness to point the finger at anything but the referendum as the root cause of the economic slowdown, evidence suggests otherwise. And, as Bank of England Governor Mark Carney warned before the referendum, it will be difficult to offset the damage.
3. The UK housing market faltered in the month after the referendum. Residential house price growth in July was the lowest in three years, according to the Royal Institution of Chartered Surveyors’ latest analysis. Despite cooling prices, economic slowdown would mean Brexit won’t help young people get onto the property ladder, a claim championed by Brexiteers.
4. Experts at the defence think tank Royal United Services Institute (RUSI) this week warned the Ministry of Defence (MoD) could face a “budget black hole” in the wake of the referendum with pound is at its lowest level against the dollar in over 30 years. This means the MoD will have to pay an extra £700 million annually for defence equipment from the US.
5. The pound’s devaluation will also increase the price of cars imported into the UK. PSA Group, makers of Peugeot and Citroen, announced it would raise prices to protect falling profit margins. Final figures are yet to be published, but the price of a Peugeot 308 compact hatchback could rise nearly 3 per cent. Currency woes have already had an impact on the cost of living, with shopping at a popular supermarket rising for the second month in a row.
6. The latest Bank of England survey of companies suggests the referendum vote will weaken investment and hiring. Construction and business services are expected to fare worst.
7. Plans to eradicate the budget deficit by 2020 have been abandoned. However, new estimates by economists suggest the government will have to borrow an extra £60 billion before the end of the parliament to soften the economic impact of Brexit. So far there is no sign at all of that extra £350m per week for the NHS promised by leading Brexiteers.
Edited by Yojana Sharma
Ofcourse there is no sign of the 350m – we are still part of the EU. Dumb.