It has been a strong few days for the British economy, led by Thursday’s news the UK’s GDP grew faster than predicted. “What Brex-pocalypse?” trumpeted the Sun, dismissing the Remain campaign’s ‘Project Fear’. But Brexiteers should not exaggerate these economic successes, including Nissan’s announcement it would make two new models in Britain. The overall picture for October is less rosy, and the sun is not yet shining on Brexit Britain.
An Office for National Statistics (ONS) report issued on Thursday said Britain’s economy expanded 0.5% in the third quarter of this year, in line with pre-referendum Office for Budget Responsibility predictions and defying economic predictions of 0.3% growth.
On Wednesday, it emerged that low-paid workers saw their biggest wage increase in nearly two decades – a 6.2% increase in a year after the government’s national living wage of £7.20 an hour for over-25s was implemented. The ONS study found weekly earnings grew 6.6% for part time workers, while the gender pay gap is the lowest since 1997; though at 9.4% it is still significant.
This week Japan’s Nissan – Britain’s second largest car maker – confirmed it will build two new car models at its Sunderland plant, following “support and assurances” from the government. This will secure 7,000 jobs in Sunderland, which shocked many when it voted Leave in large numbers in June.
These nuggets of economic success will please the prime minister, but they should not be exaggerated by Brexiteers as it does not amount to unequivocal proof the economy has weathered the impact of the June referendum. Article 50, the formal mechanism for leaving the EU, has not yet been triggered, and uncertainty still reigns.
The pound continues to languish, nearly 18% lower against the dollar compared to its pre-referendum level and despite a temporary rally on the back of the better-than-expected GDP figures. Weak Sterling has driven up inflation. Consumers will soon feel the pinch of higher prices of imported goods at supermarkets and at petrol stations. A fortnight ago, stocks of Marmite and PG Tips were temporarily depleted at Tesco supermarkets, following a price spat with consumer goods manufacturer Unilever reportedly caused by the weak pound. In the electronics sector, software giant Microsoft is set to raise its prices by up to 22%.
In addition, a report by the Resolution Foundation think tank released on Tuesday warned of an “£84 billion deterioration in the public finances” over the next five years, as lower tax receipts and higher spending could force the Treasury to borrow.
Nissan’s decision this week, while positive for Sunderland and the economy, raises other concerns. The government is refusing to reveal what “support and assurances” Theresa May offered Nissan’s Chief Executive Carlos Ghosn, leaving some to speculate it may be financial support to alleviate post-Brexit tariffs and barriers. While this could be illegal under WTO rules, it is also hard to see how other UK-based foreign-owned carmakers can be excluded. Toyota was quick to say it trusted the government to ensure it, too, does not lose out, according to the Times. More important, the government needs to be clear and transparent in its dealings so that firms can plan a post-Brexit future in Britain as the UK navigates Brexit’s choppy waters.
Want more InFacts?
Click here to get the newsletter
Edited by Yojana Sharma
Two new models? No – the Qashqai is already being built at Sunderland and so simply retains current levels of production.The X-Trail is also an existing model albeit being produced at another Nissan plant and might therefore be considered an additional model at the Sunderland plant..Much of the R and D investment in both models has already been made.Any new investment is largely for cosmetic facelifts to both models and likely to be small beer in overall terms.The real test of Nissan’s commitment will come when these models reach the end of their life cycle and wholly new models require investment.