A recent article in The Telegraph has stated that Britain is flourishing despite fears over Brexit (a portmanteau of “Britain” and “exit” in reference to their leaving the European Union). In fact, the newspaper reported, “Profits and exports are both growing at the fastest pace since 2015 – well before the Brexit vote – and capital investment spending is also at a two-year high.”
This surprising and positive news is derived from a press release by the Institute of Chartered Accountants in England and Wales (ICAEW) and information obtained from Ernst & Young.
Before and soon after the June 2016 referendum on Brexit when Britons decided to leave the European Union by a narrow vote of 51.9% there was a bit of hysteria due to the deep division between those voting to remain in the EU and those wanting to leave. At worst, the political move included the murder of a member of parliament, Jo Cox, 41, a week before the exit vote by a man with a history of mental illness. The police believe that Ms. Cox, who supported keeping Britain in the union, had been targeted for her political views.
A tad reminiscent of the hysteria that surrounded the Y2K problem in late 1999 and early 2000 the uncertainty of outcome appeared to prompt several fears. The Britons who voted to leave the EU feared they were losing their unique British culture in a European melting pot, while others felt it important that the UK decide UK policies, not the European Union. Those who wished to remain predicted that leaving the EU could harm the UK financially in the short term due to lack of trade and investment, followed by fears that a slowdown of productivity and economic growth would lead to a downturn in jobs.
Yet, according to the report by the ICAEW, Q4 2017 saw profits grow “from 3.4% in Q3 to 4.1% this quarter. This is expected to increase to 4.7% next year – consistent with rising sales and a slowdown in input price inflation.”
The report also noted that UK domestic sales growth remained stable, and export sales also improved slightly with more growth expected in 2018. According to the ICAEW, “Businesses expect continued job creation but salary increases remain steady indicating that a price-wage spiral is not a major risk.”
This news should bring about some optimism to the UK economy still suffering from the increased cost of importing fuel, clothing and food, which pushed inflation up to 2.9% in September. So far, despite the uncertainty, it appears the British economy is enduring better than forecast with the unemployment rate at a 42-year low, steadily declining since October 2016.