Brexit slowdown

by Sam Ashworth-Hayes | 26.07.2017

The output figures for the latest quarter are in, with the UK posting pretty modest GDP growth at 0.3% quarter-on-quarter. Following on from growth of 0.2% in the first quarter, this is the weakest pair of figures since 2012 when growth was briefly negative. As one senior statistician put it, we are now experiencing “a notable slowdown”.

On a per-person basis, the data are even less encouraging. GDP per head increased a feeble 0.1% in the second quarter — which with net immigration down to its lowest level in years cannot even be blamed on EU freedom of movement. Faced with this poor performance, the Brexit cheerleaders have been oddly muted. Even the Express couldn’t find it in their hearts to try out another ‘BREXIT BOOM!’ headline, instead glumly observing that this was the “narrowest of rebounds” over the first quarter figures.

High (2.6%) inflation and low growth do not a happy Chancellor make, and Philip Hammond was not in the best of spirits in his response, telling Sky News that “there is a degree of uncertainty around the UK economy in particular” while we work out the terms of our Brexit deal, and once again emphasising the importance of transitional arrangements.

This is highlighted by a quick dig into the figures. Growth last quarter was driven almost entirely by services – the sector set to be hardest hit by Brexit. The much-promised manufacturing boom that was supposed to be our compensation for the tumbling pound has not materialised.

Instead, manufacturing output fell slightly, with motor vehicles the worst performer – an industry already experiencing plummeting investment as a result of the vote. Against that backdrop, BMW’s announcement this week that it will produce electric Minis at its Oxford plant offers scant comfort.

Poor growth, falling investment, high uncertainty, and a squeeze on living standards. While I hate to say I told you so, the Brexit vote was never going to be a positive for the British economy. What was ‘Project Fear’ is becoming a painful reality of Project Damage Limitation.

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Edited by Bill Emmott