This is the second quarterly issue of the Global Counsel Brexit dashboard. Two years on from the vote – and with just nine months before the UK leaves the EU – we are taking the macro pulse of the UK economy each quarter, using a balanced set of 15 indicators. We are not attempting to isolate the impact of Brexit from all of the other factors affecting the economy, as that is near impossible. Instead, we are providing a health check, to see where the economy is faring better or worse, compared to the years before the vote.
Sensing light through the gloom
The UK economy hit the brakes in the first quarter of this year, with GDP growth slowing from 0.4% in the final quarter last year, to just 0.1% in the first quarter this year, well below market expectations. That might be partly due to bad weather, particularly as the worst performing sector in the quarter was construction. Even so, the consensus forecast for growth in 2018 has been marked down, from 1.5% to 1.4%. That’s not much, but it shows that most forecasters believe at least some of the Q1 slowdown won’t be revised away or reversed later this year.
The services sector is continuing to struggle. Banking stocks have fallen further. Brexit concerns are a possiblefactor. The services sector, more generally, is having to adjust to a tighter labour market, compounded by a sharp and sustained drop in net migration from the EU.
But there are some signs of light amid the gloom. Economic policy uncertainty has fallen sharply over the past couple of months, which is consistent with survey evidence that the Brexit transition deal, reached in March, has reduced uncertainty for business. It remains to be s een whether that lasts.
Consumer sentiment also looks to be perking up, with all three dashboard indicators improving, albeit only modestly. Consumer resilience has provided an important support for the economy since the referendum. A pick up in real earnings growth could help sustain consumer spending. It will also be a relief for the government, given the political sensitivity about this. But with oil prices higher, household budgets may soon begin to feel the pressure from rising prices once more.
Read the full Q2 2018 Brexit dashboard report here.