Growth could be substantially down by the end of 2017—with the potential figures for 2018 scarier stillby George Magnus / June 12, 2017 / Leave a comment
If you thought last Thursday morning you knew about the UK’s political landscape and its impact on the economy, you’d have been up the creek without a paddle when the exit poll came out at 10pm. For Britain’s economy now is, to use Tony Blair’s phrase, like a kaleidoscope: all the pieces are in flux. We can only guess how and when they might fall. It’s a cliche that business and markets don’t like uncertainty, but for good reason. Unfortunately, uncertainty is all we have now and for the foreseeable future. The economy had a poor start to the year, picked up a bit in the spring, but will now slow down to an anaemic rate at best. The longer political uncertainty and inertia continue, especially over Brexit, the more likely the economy stalls by the turn of the year.
You could tear your hair out, imagining political scenarios. The May government has reached an arrangement with the DUP for now, but the Conservative party will surely replace May soon and its MPs will want to try and avoid another election this year, and for as long as possible in 2018. The Fixed-term Parliaments Act provides for an election either if the government fails to win a vote of confidence or if it is overturned by a two thirds majority. But many things could turn out differently.
The DUP arrangement, leaving aside the fact that the UK government is supposed to be neutral in Northern Ireland politics so as to be able to broker stability, could flounder, leaving the Tories as a minority government for a while. Technically, the Labour Party could find itself in the same position. An election could happen sooner than anyone might want. The only certainty seems to be that since the prime minister’s credibility and authority are shot, she is not long for No 10.
How will Brexit negotiations, for which the government is still lamentably unprepared a year on from the referendum, be managed against this absurd backdrop? They are supposed to start in about a week, and will dominate, or even overwhelm, government business for the foreseeable future, spanning not just the two years provided for by Article 50 but likely far longer. Discussions…