Just over two years on from the Brexit vote, and I am wondering how the UK economy is shaping up to the challenge laid down by the 27% of the UK electorate that voted for it. Surveying a variety of sources doesn’t help draw a clear picture, and it would be easy to cherry pick statistics that suit your argument. But overall, the view seems to be that things are basically flatlining – for example, the single biggest economic change so far has been the decline in Sterling’s value, and whilst recent figures show an improvement in UK trade balance terms, when compared to other EU countries, the UK’s trade growth is poor, as the above graph from Reuters illustrates (for the three months to November, 2017).
Our trade deficit is down, from minus 5.2% of GDP in 2016 to 3.4% by the end of the first quarter this year (ONS). But what of that GDP? Since quarter two in 2016 to quarter one in 2018, it has grown by just 2.9%, i.e. the total in just under two years. This falls somewhat behind total EU growth of 2% in 2016, and 2.5% in 2017 – and that EU figure will have been dragged down by the UK contribution - the UK is 15% of the EU economy.
One could go on, but despite some out of context signs of cheer for Brexiters, the overall picture – our context at least in the EU world – is that the UK is underperforming, our relative position in other words is declining. And we’re paying for it partly with massively reduced savings and massively increased debt – “Deficit of UK households in 2017 ‘worst on record’” is a headline in today’s Guardian.
These lacklustre figures help explain why the UK National Debt, by the end of last year stood at £1.786 trillion, up from £1.652 trillion in March, 2016 – an increase of over 8%. Government borrowing may be down thanks to austerity, but if you’re running a shit economy you’ll have austerity for ever and a day.
What this government, despite some mixed messages, seems intent on doing post-Brexit is to enter a low taxation competition to attract more inward investment. Lower taxes=more business=equals more tax revenue is the mantra of your Jacob Rees-Muggs and the Man from Mars John Redwood. But this will merely be another factor in deepening austerity. And that, I think will be one of the consequences of Brexit.