Special report: UK in limbo

Browse By

Economically, 2016 was a sensational, revolutionary and, in the eyes of some, horrific year for the UK. Brexit is looming and new fears have emerged over a market crash possibly as bad as that of 2008. Alongside this uncertainty is the presence of an ever unpredictable parliament with Mrs May keeping her Brexit cards close to her chest. It appears that the UK is in limbo — nobody, not even the government, truly knows the next move to be made on the political chessboard with the European Union. Ultimately, people remain apprehensive and worried about the unpredictability of these constantly evolving political and economic times.

What astounded the academics and the economists alike was the response of the public to the decision for the UK to leave the EU. All predictions pointed to a retraction in the economy with consumer confidence plummeting and business investment ceasing to exist. Yet, as we now know, the complete opposite of these predictions happened although it is worth noting that nothing much has actually happened yet in terms of our retraction from the EU! Although the economy hasn’t gone the way predictions led voters to believe, the economy can change at the drop of a hat, and as the monumental decision is yet to be enacted the result is still very much an open book.

In the meantime, according to market research firm GfK consumer confidence is up, only three months after the UK voted for Brexit. It would appear that high streets saw very little change by way of a damaged consumer market. In fact, consumer spending grew by £528m this January, showing how businesses and households are looking straight through Brexit and propelling the economy through a markedly uncertain time. Conversely, one might ask the question — have UK citizens recognised that the worst is still yet to come? Perhaps, secretly, the citizens of the UK are spending now as if pre-emoting a dire state of affairs post-negotiations.

Critics of Brexit were correct about the pound — it fell to a three-year low against the euro when Theresa May declared, in August 2016, that the UK would start formal negotiations on Brexit by March 2017. Since then, the pound has remained volatile and still has not recovered to pre-referendum rates. Consequently, foreign holidays are costing Brits more, imports for manufacturers are considerably dearer and the price of Apple goods are now astronomical (due to a strong US dollar made worse by a poor pound).

Beyond this, interest rates have fallen to a record low of 0.25% — good for the property market, but bad news for savers. The drop in base rates seems to have added petrol to the fire and the UK economy thus far seems unaffected by the immediate consequences of Brexit. However, is this response just the signature of British confidence and resilience? Or is there something much more sinister brewing for the UK economy?

Today, we are not out of the EU, in fact we are very much still a part of it. However, we have declared our intention to leave, which puts us in a halfway position — a political and economic void. Just around the corner looms, to some, sovereignty and freedom, and to others isolation and tyranny.

The UK waits in a tentative position — that much is certain. It would seem that the UK has stopped at a set of traffic lights on amber, unsure of whether to keep moving forward or to wait for a green or red light. Our economy lacks instruction and finds itself in limbo as it eagerly awaits the direction and decisions of politicians in Westminster and Brussels to move into its next phase.