Generally speaking, the UK economy has outperformed the dire forecasts offered up ahead of last year’s Brexit referendum.
We didn’t fall into immediate recession, we didn’t see hundreds of thousands of workers laid off and we haven’t seen the four-figure hit to household income the Treasury predicted. Nevertheless, as the new year approaches it’s no good looking back over old arguments and despite historically low levels of unemployment (a feat which should never be overlooked) it is impossible to ignore the warning signs on the dashboard of the UK economy.
Inflation continues to run ahead of wage growth while 2018’s GDP growth forecasts are beginning to look embarrassing when viewed alongside those of the Eurozone, the US and Asia. Today, PwC releases its Global Economy Watch report, painting a picture of growing economic disparity ahead of the new year.
They predict UK growth of 1.4 per cent (broadly in line with other forecasts) and growth in the Eurozone of a more muscular two per cent. Ireland is set to power ahead with 3.5 per cent growth while the US enjoys a Trumptastic 2.4 per cent.
China and India could each see expansion of seven per cent and overall global GDP growth is predicted to come in at a bullish four per cent. You get the picture: the UK risks becoming a laggard.
All forecasts should be taken with a pinch of salt, but laid bare alongside international comparisons our own position looks relatively anaemic. PwC’s number crunchers cite Brexit uncertainty as the underlying cause of this gloom.
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This begs the question: will the formal move to the second phase of talks, combined with the emerging clarity on the terms of transition, counteract the nervousness that came to characterise much of 2017?
Well, it’s possible – but only if Theresa May’s Cabinet can agree on a desired end-state. If the first half of next year is dominated by government splits over the virtues of alignment versus divergence, then PwC’s forecast is likely to take hold.
Ministers may not be able to provide clarity about the nature of the UK’s ultimate relationship with the EU, but they should be able to provide a unity of purpose and lucidity of message that has so far eluded them.