Ruth Lea, economic adviser at Arbuthnot Banking Group, says Yes.
The latest Markit survey results found that business activity picked up appreciably in December in all three sectors – manufacturing, construction and services, suggesting that growth remained buoyant in the final quarter. Moreover, I expect growth to remain fairly robust in 2017, at around 1.5 to 2 per cent, much as it would have been if there had been no Brexit vote.
Granted, businesses may be a tad hesitant to invest, given the “uncertainty” over Brexit, but they always face uncertainty, and investment has held up fairly well so far. And higher inflation will squeeze real incomes, assuming annual earnings growth at around 2.5 to 2.75 per cent, putting downward pressure on household consumption growth. But the Bank of England’s monetary policy remains ultra-accommodative and the weaker pound should help exports.
With a continuing – if unspectacular – recovery in the Eurozone, and the likelihood of stronger growth in the US, the prospects for our major trading partners look fair, which should also support our exports.
Dean Turner, UK economist at UBS Wealth Management, says No.
Last year is likely to be as good as it gets for the economy, at least for the time being. Activity in the UK has held up better than initially feared since the Brexit vote in June, supported by the fall of sterling and an easier stance on monetary and fiscal policy.
In 2017, while these tailwinds remain, there is little scope for further stimulus. Meanwhile, headwinds for the consumer will come from rising inflation. A softer labour market means that wage growth may struggle to keep pace with prices on the high street, so consumption could struggle to keep its post-referendum momentum.
The economy is unlikely to go into reverse this year, but the rate of growth may be slower than what we have been used to. The risks, to be frank, are finely balanced in either direction. The global backdrop should remain supportive, leaving the onus on domestic demand. Much will depend on how Brexit negotiations develop and, crucially, how businesses and households react along the way.