UK growth is plummeting thanks to Brexit—and a recession in 2018 can’t be ruled out. Meanwhile, things are very different for our friends on the continentby George Magnus / August 1, 2017 / Leave a comment
Bit by bit, the Brexit narrative advanced by “Leave” supporters about Britain’s superior economic credentials in Europe is falling apart. Not only are we seeing a slow-motion fade in the UK’s economic resilience, but the contrast with an economically feistier Euro Area couldn’t be starker. Last month, Duncan Weldon, looking at the divergent trends of the UK and the Euro Area, suggested here that the title of “sick man of Europe” was very likely to shift back to the UK. Even if the Euro Area’s economic “renaissance” is slightly exaggerated by the latest batch of figures, he’s still likely to be right.
In the UK, most economists were taken by surprise by the bounce in the economy in the second half of 2016, after the Brexit vote. Good as it was, it didn’t last. In the first quarter of 2017, GDP rose just 0.2 per cent, and it was reported recently that in the second quarter it was just 0.3 per cent. At roughly 0.5 per cent for the first half of this year, that’s the equivalent of just 1 per cent growth at an underlying rate. The annual rate of growth has already slipped from over 2 per cent last year to 1.7 per cent and is bound to slide further, bearing in mind the average 0.6 per cent quarterly rise in GDP in the second half of last year. By the end of 2017, I’d expect the reported annual growth rate to be pretty close to that 1 per cent underlying rate.