Brexit a year on: Four graphs that show how the economy responded

Jasper Jolly
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The Brexit vote is still making its effects felt on the UK economy (Source: Getty)

A year on since the Brexit vote it sometimes feels we know even less about what will happen than we did before the results started to come through.

A weak minority government propped up by the Democratic Unionist Party (DUP) has only just started out on the gargantuan task of negotiating a deal on leaving the EU, but meanwhile the economy has chugged on.

Here are four graphs which tell at least part of the story of the last year since the momentous vote.

Many economists (not least in the Treasury) predicted a severe hit to the economy in the case of a Leave vote. That may well still happen, depending on the deal with the EU, but we can certainly say that in the short term at least growth seemed to be unaffected.

Resilient consumer spending surprised economists, including the Bank of England, who predicted a sharp shock to output. That did not materialise, although there are some warning signs of a slowdown – not least the hard data since then showing growth slowed in the first quarter of the year.

Where the short, sharp shock was undoubtedly felt was currency markets. Sterling plummeted as it became clear the Leave side had won the day.

Since then the fortunes of sterling have been dominated by the Brexit process. The massive long-term implications of leaving the EU on UK trade mean Brexit has been the only game in town for currency traders.

For businesses and markets the twists and turns in politics since then (not least the shock General Election result) have given little clue as to what the final terms of trade will be with the UK's closest and biggest market.

Sterling's fall made inflation surge faster than the Bank of England expected, far beyond policymakers' two per cent target.

That has prompted a serious split on the interest rate-setting monetary policy committee (MPC). Three of eight MPC members voted to raise interest rates last week to battle inflation, with the Bank's chief economist adding his weight to the hawks yesterday.

However, governor Mark Carney has stood firmly against raising rates, with worries over the effect on growth if the supply of easy money dries up as well as the negligible signs of a pick-up in domestically generated inflation.

Real wages have started to fall as the inflation surge has weighed on consumers. Economists predict this to be the big near-term threat to consumption-led growth.

As long as prices are rising faster than wages, consumers will feel the squeeze and will be less likely to spend on discretionary items. This could reduce demand throughout the economy – the same resilient demand which has buoyed up growth so far.

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