The PM’s plans will exacerbate challenges facing the beleaguered UK economyby Paul Wallace / December 13, 2019 / Leave a comment
A remarkable feature of the election was that the economy, usually centre-stage in the campaign, counted for so little. But it will come to the fore now, determining whether Boris Johnson can consolidate his triumph at the polls or whether his lustre will soon fade. Whether the economy performs well or badly will be crucial in determining living standards and the ability of the Treasury to finance better public services, above all the NHS.
The neglect of the economy in the election was particularly odd given how poorly it has been doing this year. Official figures released just two days before the election showed that activity had ground to a standstill in the three months to October. On the basis of these numbers, Garry Young of the National Institute of Economic and Social Research estimates growth of 0.1 per cent in the final quarter of 2019. Taking the year as a whole, he now expects growth of just 1.3 per cent. That would be the lowest since 2009 when GDP shrank drastically in the wake of the global financial crisis.
The Bank of England forecast in early November that the economy would grow in 2020 at the same sluggish pace as in 2019, but on the brighter side, it expected a pick-up in the course of the year, to 1.6 per cent by the final quarter of 2020. However, that projection was based on “an orderly transition to a deep free trade agreement,” said Mark Carney, the Bank’s governor, on 7th November. That assumption has been swept aside by the Conservatives’ commitment in their manifesto, launched on 24th November, not to extend the transition period following the planned Brexit in January, beyond the end of 2020. That has rekindled worries about a hugely damaging no-deal Brexit, tearing the economy out of the customs union and single market in which it will remain during the transition period.
The one certainty about 2020 is that the hardening of the Conservative stance during the election will foster further uncertainty. This will continue to gnaw away at the economy as firms suspend or retrench their capital projects. The Bank of England said in its November monetary-policy report that the uncertainty generated…