DEBATE: Can we blame the UK's flatlining growth on Brexit?
YES – Dr Victoria Bateman, lecturer and fellow in Economics at Gonville and Caius College, Cambridge.
While the Eurozone enters its fifth year of recovery and the IMF upgrades its forecasts for Germany, France, Italy and Spain, UK growth for 2017 is experiencing its weakest performance for the past five years. In fact, at 0.3 per cent this quarter, it’s half the level of a year ago. It’s divergence, big time. Global growth is gathering momentum, meaning that there is no excuse for faltering performance. And Britain’s productivity performance compared with Europe is abysmal (we rank 15 out of 17 in Western Europe), so there is plenty of growth potential. One thing stands in the way: Brexit. At the very point when we need businesses and government to be upgrading the growth base of the economy, uncertainty is creating a perilous pause. Even the part of the economy that is experiencing positive growth – the service sector – shows little sign for optimism. At 0.5 per cent growth this quarter, it’s only in line with growth during the post-2009 downturn, and, looking more closely, we find that the scientific research component it contains is experiencing negative growth. Altogether, not much reason to be hopeful.
NO – Nathan Sweeney, senior investment manager at Architas
We are approaching the 10 year anniversary of the credit crisis and everybody is looking for someone to blame for subdued UK growth. In this particular case, it’s not just Brexit. UK growth in the current economic cycle peaked at the end of 2014 and has been slowing ever since. Yes, sentiment and business activity has slowed since the referendum. However, companies have not been spending for the best part of a decade and the trend towards lower growth was in place long before the vote. Corporates have been in protectionist mode preferring cost cutting over capital expenditure. We need to reverse this mindset if there is any hope for a real pick-up in growth. The stark reality is that consumers have been propping up growth through spending on credit. But there have been warning signals that this was beginning to fade, as UK consumers were overextending themselves. There is a natural limit to this spending, which we may now be reaching.