Thursday 27 October 2016 6:15 pm

Following better than expected third quarter GDP figures, have Project Fear’s warnings been disproved?

David Blake, a professor at Cass Business School, City University London, says Yes.

The Treasury’s pre-Brexit scaremongering has been proven so wrong, but it sticks to its original, completely implausible assumptions. Its latest position is that those forecasts were made based on the assumption that Article 50 would be triggered immediately, and that no policy response would issue from the Treasury or Bank of England.

We are expected to believe that the government sits on its hands doing nothing, and that triggering Article 50 causes more uncertainty than not. It’s hard to judge which is more incredible.

Economists for Brexit, of which I am a member, was the only serious economic body making the economic case to Leave. Not only did we forecast that the economy would hold up in the short term (our forecasts were in line with yesterday’s numbers), but will ultimately thrive, should the right Brexit policies be pursued – namely global free trade.

The Treasury urgently needs to review its long-term forecasts, and its models, so that the government can make the best decisions for the economy’s long-term future.

Vicky Pryce, a board member of CEBR and a former joint head of the government economic service, says No.

The GDP increase is welcome news. Although we must not over-interpret such early estimates, the huge injection of liquidity by the Bank of England, lower interest rates and high employment levels have no doubt helped.

The real worry is that long periods of uncertainty deter investment – Nissan notwithstanding – and lower long-term growth potential. The timetable for an exit is finally clear, but the outcome isn’t. And some of the third quarter data make worrying reading. The rise was entirely in services, as foreign visitors took advantage of a weak pound, and consumer spending was boosted by cheap credit and high employment. That will reverse as inflation rises and real incomes are squeezed.

Worryingly, industrial production and construction output fell, and despite the drop in the pound, manufacturing output also fell by 1 per cent. Expectations for this year may be going up, but forecasts for 2017 have been continuously downgraded.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Share