Defying downturn predictions following Britain’s shock Brexit referendum the British economy has surged forward. However in the long run, the price of the sterling and its ability to negotiate access to EU’s single market will determine the country’s economic future.
In an unexpected move that could further bolster the post-Brexit British economy, British consumers have significantly increased their borrowings, their biggest in more than 11 years in November, in what could prove to be their biggest spending spree ahead of an expected upswing in consumer prices.
As per data collected by England’s central bank, net consumer lending have beaten expectations by rising by $2.36 billion (1.926 billion pounds) in November. This marks its biggest rise since March 2005. In comparative terms, it is 10.8% higher than from its previous year figure.
Following Britain’s historic referendum, consumer spending has been the country’s growth engine and has placed Britain among the fastest growing economies among the advanced economies in 2016.
Although this trend is likely to continue it is however unclear how long this will last.
As per Martin Beck, an adviser to forecaster EY ITEM Club, the increase in consumer shopping could reflect shoppers taking advantage of Black Friday deals ahead of expected rise in prices.
The steep fall of the sterling is likely to impact consumer prices which are likely to appreciate in the immediate future.
“Such rapid growth in unsecured credit is unsustainable over the medium-term, and the recent fall back in consumer confidence suggests that households will borrow more cautiously in 2017, subduing growth in consumption,” said Samuel Tombs an economist at Pantheon Macroeconomics, in a note to clients.
As per consumer surveys designed to grasp concerns regarding the country’s economic outlook as Britain prepares to initiate divorce proceedings with the EU, consumers are continuing to make major economic purchases.
In what could be a possible harbinger of days to come, Next, a major clothings retailer, has cut its profit forecast for 2017-2018 after a dip in sales during the holiday shopping season. It has warned of a further decline in 2017-2018.
Significantly, Next has been the strongest performer in the last decade.