June 24th will be a day of revelation. Depending on your perspective, London will either be freed from the shackles of a sclerotic European Union, or the fog of uncertainty will be lifted by a Remain vote, triggering a flood of welcome investment. Those are the cheery viewpoints, at least.
Striking a less positive note, Bank of England governor Mark Carney provided a snapshot of Brexit dystopia yesterday; a “technical recession”, a “sharp depreciation” in the value of the pound, “prolonged uncertainty”, “higher inflation” and “reduced real incomes”. Coming from the mouth of a central banker, it was almost poetic. Dante-esque.
His comments prompted a huge political row, but away from that debate, we must also consider what happens if Britain votes to stay in the EU (as is still the most likely outcome). Anyone who thinks a Remain vote will be the silver bullet that jolts the economy back to life needs to take a closer look at the data.
The UK economy is growing at its slowest rate since the days when double-dip was the talk of the town. A host of business surveys in every sector of the economy are running at multi-year lows. The FTSE 100 is struggling to stay above 6,000 and looks to be on a decidedly downward trajectory from its April 2015 peak of 7,089. Our current account deficit – at an eye-watering seven per cent of GDP – is the highest ever on record. Consumer confidence has been tumbling. It is simply naive to attribute all these bearish signs to the “threat” of a Brexit.
And that’s before we look abroad. The Eurozone is only showing signs of life thanks to the superhuman efforts of the European Central Bank (ECB). Our largest export market, the United States had a rotten first quarter. While its Brexit warnings made the headlines, the Bank of England still believes a hard landing in China is the biggest threat to financial stability. Carney said yesterday that half of sterling’s recent fall can be attributed to the referendum; a fair point but one that raises the inevitable question – what about the other half?
Blame it all on the referendum if you like. But however Britain chooses to vote, the economy has more to worry about than just whether we are in or out.