Thursday, January 26, 2017

Despite the Brexit, the United Kingdom showed the strongest growth in the G7 – The World

The uk growth in the fourth quarter was 0.6 %, bringing the increase in GDP in 2016 to 2 %.

the Queue in front of a store, Harrods, in London. In the fourth quarter of 2016, the sector of distribution, hotels and restaurants increased by 1.7 %.

the main explanation for The good economic form of the United Kingdom is the consumer. Households have continued to spend, reducing their level of savings, and resorting to the use of credit cards and consumer loans. As was recognized recently, the chief economist of the Bank of England, economists were wrong at least on one point of their expectations : the vote in favour of the Brexit does not cause reflex of fear among consumers. In the fourth quarter, the distribution sector, hotels and restaurants increased by 1.7 %. Clearly, the British have celebrated Christmas and the holidays of the end of the year without restraint.

This confidence is quite logical. The majority of them has voted in favour of the withdrawal from the european Union (EU) ; they obtained what they wanted, lifting the way a wind of patriotism on the background of the speech of the new government, promising a bright future. In addition, the Brexit has not yet taken place and the article 50 of the Lisbon treaty, which should launch the beginning of the withdrawal process of the EU, has not yet been invoked.

On the other hand, industrial production in the fourth quarter stagnated (+ 0.1 %), as well as the construction sector (+ 0.1 percent).

also Read : The amazing strength of the consumer English

  • The difficulties merely postponed ?

The question now is whether any of the difficulties related to the Brexit have been pushed back or if they will not take place. The broad consensus of economists, but also by employers and all industry lobbies the british, is that the year 2017 will be a lot more delicate. The growth forecasts ranged between 1.2 % and 1.6 %.

Even the CBI, the main employers ‘ organisation, who would have reasons to show his serenity, was anxious. the ” In 2017, we will see the difficulties accumulate “, writes Rain Newton-Smith, its chief economist.

The first problem comes from inflation, which is clearly rising. It was 0.6% in June, at the time of the vote for the Brexit. In December, it reached 1.6 % and is expected to exceed 3 % this year.

The price increase is the logical consequence of the devaluation of 20 % of the pound sterling since the vote. Mechanically, the decline in the currency raises the import price, and therefore the majority of consumer goods, while wages of households increases slightly. the ” The growth of consumption will gradually stop “, writes Nina Skero, economist at the Centre for Economics and Business Research.

a Few first signs of a slowdown seem to appear. In December, the consumption has decreased by 1.9 % compared to the previous month. On a year, it remains very strong, up 4.3 %. But the amazing dynamic of the previous months is it broken ?

  • The paradox of the automobile

in Addition to inflation, another concern is the slowdown in investments. The companies that have commercial ties with the EU are worried : will there be customs duty ? Administrative complications ? In the absence of a response, some prefer to wait.

The automotive sector presents from this point of view an interesting paradox. The year 2016 has been excellent. The production is at its highest level for seventeen years, with 1.7 million vehicles manufactured in the United Kingdom, half of which is exported to the EU.

Now, the major automotive groups have largely suspended their investments. According to the Society of Motor Manufacturers and Traders (SMMT), the lobby of the sector, they have invested € 2 billion in 2016, a third less than in 2015 and two-thirds less than in 2014. the ” I believe that businesses known to lie in wait, waiting to see the light, “, recognizes Mike Hawes, the director of the SMMT.

This “wait and see” does, for the moment, not in the numbers mix. But if the negotiations on the Brexit go wrong, the harsh reality will be felt on the ground. Conversely, if a free trade agreement is found with the EU, these investments driven back should materialize and the growth of the sector could resume. To find out, it will have to wait at least two years, the time allotted for the negotiations.

also Read : The London stock Exchange is making fun of the Brexit


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