There are now signs of a potentially serious slowdown in Britain’s economy after a prolonged period of relatively benign economic numbers following last year’s vote to leave the European Union.
From a widening trade deficit to lackluster manufacturing, they stretch from retrenching households to hesitant businesses. And at this juncture, the EU and Britain are return to the negotiating table, the latter with a handful of new post-Brexit position papers.
Official paper on issues such as what the province of Northern Ireland’s future border with EU member Ireland will look like, the European Court of Justice, customs and trade have been released by London since mid-August.
Few people were impressed enough with them — or with the likelihood they will come to pass — to overcome the economic signs, suggests the performance of Britain’s pound over that period.
The pound has lost more than 1.4 percent against the dollar since Aug 14 and the euro has gained the same against sterling running through the release of five official Brexit papers.
Their release has clearly done nothing to improve confidence in the currency even while the pound weakness is not directly linked to the papers.
That the UK economy is starting to feel the impact of Brexit is at least partly responsible.
“Economic momentum looks uncertain. Monthly factory orders this year suggest that the sector is failing to capitalize from a weaker sterling and a pick-up in global trade,” Jaisal Pastakia, investment manager at Heartwood Investment Management, said in note.
Elsewhere, consumer spending slumped to a two and a half year low of just 0.1 percent quarter-on-quarter showed second quarter economic growth figures.
And also at a standstill is business investment. Barclays said this was “highlighting just how much businesses are holding back investment in the face of high levels of uncertainty regarding the outlook for business conditions.”
Warnings EU workers it relies on are already leaving or considering doing so from Britain’s heavyweight food supply industry is also adding to it.
But this trend is not completely linear. While the unemployment rate is falling, car manufacturing bounced back in July.
And pointing to steady — albeit sluggish — economic growth over the coming months was last month’s purchasing managers indexes.
So the wheels have not come off.
But a stark contrast to what the other side is experiencing is the backdrop for Britain as it returns to the table on Monday.
And flying high is the euro zone, which comprises 19 of what will be the remaining 27 EU members.
While even the bloc’s notoriously high unemployment rate is falling, economic sentiment is cruising at levels last seen before the financial crisis and the latest data shows annual growth at 2.2 percent, the highest for more than six years.
And among euro zone countries, improvement is fairly widespread.
The euro zone has now had 17 consecutive quarters of growth, noted Florian Hense, an economist with Berenberg bank.
“And most countries of the currency union were at the party,” he said in a note. “Countries that have for a very long time… struggled do get a stable footing, are beginning to recover, too.”
(Adapted from Reuters)