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How has economy fared since Brexit vote? How has the economy fared since Brexit vote?
(2 months later)
Before the EU referendum, debate raged about what the impact would be of a Leave vote. Now the country has backed Brexit, have the predictions - including the government's warnings about an economic shock - come to pass? With Theresa May about to trigger Article 50 and the UK set to start two years of Brexit negotiations with the rest of the EU, how is the country's economy doing?
Before the referendum last June, many economists produced gloomy forecasts which have since been proved wrong. Consumers' confidence has not suffered, and by and large, things have gone on as before.
However, the UK has not actually left the EU yet - the real change may only happen once it does.
The current uncertainty, ahead of talks between the UK and the rest of the EU, over what form Brexit will take is an issue for many firms when it comes to investment planning.
EconomyEconomy
Many economists prior to the referendum had been predicting an immediate and significant impact on the UK economy and consumer confidence should the country vote to leave the EU. But so far these predictions have not come to pass. The UK economy grew by more than previously reported in the final three months of 2016, according to the latest official estimate.
Latest figures show the economy grew by 0.6% between July and September, faster than previous estimates. Gross domestic product (GDP) increased by 0.7%, up from 0.6%, according to the Office for National Statistics (ONS).
Separate figures from the ONS showed the UK's current account deficit widened towards record levels in the third quarter, with few signs that the fall in the pound in the wake of the Brexit vote had helped to boost exports. The upward revision is mainly due to the manufacturing industry having done better than thought.
GfK's consumer confidence index - which had returned to pre-referendum levels in September - went up in December by one point but was still down compared with the start of the year, while its Major Purchase Index was five points higher than a year earlier. The ONS cut its estimate for growth in 2016 as a whole to 1.8%, down from the 2% it forecast last month.
As for the Christmas shoppers, High Street sales were 0.1% lower in December than they were the previous year, according to BDO's High Street Sales Tracker, but online sales were 19% higher than a year earlier. There are hints that Brexit uncertainty is hitting business confidence. The ONS also said there had been a slowdown in business investment, which fell by 1% compared with the three months to the end of September.
Inflation has gone up from 0.5% in June, with the Consumer Prices Index (CPI) at 1.2% in November, its highest rate since October 2014. Growth in the UK's service sector eased to a five-month low in February, according to a closely watched survey.
In its report for the Autumn Statement, the Office for Budget Responsibility upgraded its growth forecast to 2.1% in 2016, from 2.0%, but downgraded to 1.4% in 2017, from 2.2%. The Markit/CIPS purchasing managers' index (PMI) for services fell to 53.3, down from 54.5 in January. However, it remains above the 50 threshold that separates growth from contraction.
Government finances were forecast to be £122bn worse off in the period until 2021 than had been forecast in March's Budget. Meanwhile, the UK's independent budget watchdog, the Office for Budget Responsibility (OBR) recently revised up its growth forecast for this year from 1.4% to 2%.
The Bank of England has raised its forecast for economic growth next year to 1.4% from 0.8%, but cut expectations for 2018 to 1.5% from 1.8%. However, it expects growth to then slow to 1.6% next year.
Timing of the official start of Brexit process The pound and share prices
Prime Minister Theresa May - who replaced David Cameron after he quit in the aftermath of the referendum - announced at the start of October her deadline for beginning the formal Brexit process. The pound fell dramatically after the Brexit vote last year, and since then has been trading around 15% lower compared to the dollar and 12% lower compared to the euro than it was before the referendum.
She said that Article 50 of the Lisbon Treaty, which triggers two years of formal negotiations, will be invoked before the end of March 2017. In practice this means the UK will be out of the EU by the summer of 2019. The fall in the pound has helped exporters but it has made foreign holidays more expensive for British tourists.
A legal challenge - to force the government to give MPs a say before the Article 50 process starts - has been heard in the Supreme Court, with the decision expected in January. It has also increased import costs for manufacturers (see Trade below) which is a key factor for sectors such as the car industry, where vehicles which may be completed in the UK often have imported component parts.
The government has agreed to publish some details of its Brexit "plan" before Article 50, but it is not clear how much detail will be released. Record low UK interest rates have also contributed to a weaker pound.
Currency When Parliament passed the Brexit bill allowing the prime minister to trigger Article 50 and start the Brexit negotiations, the pound hit an eight-week low against the dollar.
The pound fell dramatically after the Brexit vote at the end of June. Currency strategists say that sterling is likely to remain volatile in the coming months until there is greater clarity about the UK's Brexit deal.
It then declined to a three-year low against the euro following Theresa May's announcement that the UK would begin formal Brexit negotiations by the end of March taking its fall from a pre-referendum rate of over 1.30 euros to a low of 1.09 euros in October. The pound may have weakened but investor confidence as measured by UK share prices is holding up well - UK stockmarkets have risen since last summer.
It fell again on 9 January when commentators interpreted Mrs May as having suggested the UK would leave the single market. The FTSE 100 has risen 16% since the eve of the referendum.
By 12 January it had regained some ground back to a pound being worth 1.14 euros. Much of this could be linked to the pound's decline. As big companies' profits are often international and calculated in dollars, they would automatically rise when converted back into the weaker pound.
The same day the pound was worth $1.21 - compared with $1.47 pre-referendum. Yet there is a similar picture when looking at the mid-range FTSE 250, which includes many firms focused on the domestic market. This index is now about 11% higher than it was on 23 June 2016.
The fall in the pound helps exporters but it makes foreign holidays more expensive for British tourists and it has also increased import costs for manufacturers (see Trade below).
The falling pound triggered a stand-off between Tesco and its biggest supplier, Unilever, which wanted to increase prices in the UK to compensate for drop in value. This led Tesco to temporarily stop selling some of his most famous brands - including Marmite - to online shoppers.
However, one beneficiary of cheaper sterling has been the UK's own tourism sector, as a weaker pound makes Britain a cheaper destination for overseas tourists. The travel analytics firm ForwardKeys says flight bookings to the UK rose 7.1% after the vote.
Caissa Touristic, a tour operator specialising in Chinese travel to Europe, says it saw a 20% increase in enquiries and bookings for the UK this summer compared with the same period last year, while Irish no-frills airline Ryanair says it has seen a rise in overseas visitors travelling to London, Manchester, Liverpool, Leeds and Scotland.
Meanwhile, stock markets have been bullish since the Brexit vote. The FTSE 100 closed at a record high at the end of 2016, up 14.4% during the year.
The FTSE 250, which is seen as a better yardstick of the UK economy because it has more domestic-focused companies, ended the year 3.7% ahead.
Interest ratesInterest rates
Since the vote the Bank of England has taken a number of steps to boost the UK economy. It cut interest rates from 0.5% to 0.25% in August - the first reduction in the cost of borrowing since 2009 and taking UK rates to a new record low. Importantly, many forecasts of immediate economic gloom if the UK voted to leave the EU were proved wrong. They did not take into account possible compensatory action by the Bank of England in the wake of a Brexit vote.
The Bank left its main interest rate at 0.25% in December. After the referendum the Bank of England took steps to boost the economy. In particular it cut interest rates from 0.5% to 0.25% in August - the first reduction in the cost of borrowing since 2009 - taking UK rates to a new record low.
After the referendum the Bank also announced a huge extension of its quantitative easing programme by an extra £70bn, and a £100bn scheme to force banks to pass on the low interest rate to households and businesses. Rates are unlikely to go up any time soon. This month's Budget provided little stimulus for the economy via tax breaks or spending announcements, so the Bank is more likely to keep rates on hold, because raising them could affect growth.
One effect of the interest rate cut is that it has exacerbated the growing pension funds deficit because of falling bond yields. As yields fall it reduces the incomes pension funds get from their investments. However, at the most recent meeting of the Bank's interest rate-setting committee, one member of the Monetary Policy Committee did vote for a rate rise.
Negotiations
Mrs May has met EU leaders including Germany's Angela Merkel and French president Francois Hollande, but formal negotiations on the UK's departure from, and its future relationship with, the EU have yet to start.
EU leaders have said Article 50 of the Lisbon Treaty must be triggered before negotiations can begin.
The government has not yet set out in detail what it wants from the talks, with reported differences between key figures on the balance between free trade and immigration curbs.
Mrs May has faced repeated calls to set out what she wants Brexit to look like, but has refused, saying there will be "no running commentary".
Although David Davis has been appointed Secretary of State for Leaving the European Union, it is as yet unclear whether he will be leading the UK's negotiating team on a day-to-day basis.
The UK's top official in Brussels, Sir Ivan Rogers, resigned in early January - urging civil servants to continue to "challenge ill-founded arguments and muddled thinking" about the process.
In his resignation letter, the UK's permanent representative to the EU warned that there was a shortage of "serious multilateral negotiating experience" in the civil service and it was essential his successor, later named as Sir Tim Barrow, was "centrally involved in the negotiations if the UK is to achieve the best possible outcomes".
Meanwhile, Former French Foreign Minister Michel Barnier has been appointed by the European Commission to lead the negotiations.
Hate crime
According to Home Office figures, racist or religious abuse incidents recorded by police in England and Wales jumped 41% in the month after the UK voted to quit the EU.
There were 3,886 such crimes logged in July 2015, rising to 5,468 in July this year, it said.
The sharp increase declined in August but has "remained at a higher level than prior to the EU referendum".
The number of hate crimes overall in the year 2015-16 were up 19% on the previous year.
Police have also said reported hate crime rose by 57% in the four days after the referendum.
It's impossible to tell to what extent the spike was about a rise in reporting and to what extent it was about a rise in actual incidents. What we do know is that most hate crimes typically go unreported. The government has announced a plan to tackle hate crime in England and Wales and police handling of such incidents will be reviewed.
As the latest figures were published on 13 October, the National Police Chiefs' Council said the number of hate crime incidents had fallen from the post-referendum spike.
House pricesHouse prices
House prices in the three months to December were 6.5% higher than in the same three months of 2015, Halifax reported. UK house prices accelerated in February rising by 4.5% in a year, according to the Nationwide, and by 5.1%, according to the Halifax.
The Nationwide said that house prices increased by 4.5% in 2016, the same rate as 2015. "Housing demand is being supported by an economy that continues to perform well with employment still expanding," said Martin Ellis, Halifax housing economist.
The Council of Mortgage Lenders said gross lending in the 12 months to November rose by 3%. But the rate at which house prices are rising has slowed significantly, nearly halving since spring 2016. The outlook for the market is uncertain, with the Nationwide predicting a 2% rise in UK house prices over the course of 2017.
In September, the Royal Institution of Chartered Surveyors said the housing market had "settled down" since Brexit.
MigrationMigration
Most of the period covered by the latest migration figures was before the EU referendum, but they also include one week after the poll. Net migration to the UK dropped to 273,000 in the year to September 2016, down 49,000 from the previous year.
In the year to June, net migration stayed near record levels, standing at 335,000, the Office for National Statistics said. The Office for National Statistics said it was the first time in two years the balance of people arriving and leaving the UK had dipped below 300,000.
There was also a record number of EU citizens coming to live in Britain with the figure standing at 284,000. Published in February, this is the first data to include migration estimates following the EU referendum.
Immigration was estimated to be 596,000; of these 268,000 were EU citizens, 257,000 non-EU citizens and 71,000 were British citizens.
Some 323,000 people are thought to have left the UK in the same period, up by 26,000 on the previous year.
Of these, 103,000 were EU citizens, 93,000 non-EU citizens and 128,000 British citizens.
TradeTrade
In the month of the referendum, the UK trade deficit in goods and services widened to £5.1bn after imports hit a new high. The UK has long been running a trade deficit, meaning that overall it imports more than it exports, and both imports and exports have been boosted by the weaker pound.
But latest figures show it narrowed to £2bn in October as exports rose by £2bn, lifted by machinery and transport orders, while imports decreased by £1.8bn, the Office for National Statistics said. UK exports and imports both rose in January - by £400m and £300m respectively - leaving the trade deficit in goods and services steady and unchanged from December 2016 at £2.0bn, the ONS said.
The ONS said there was "only limited evidence so far" that the fall in the pound's value had led to a "marked increase in UK exports". However, the ONS also said that in 2016, excluding oil and other erratic commodities (such as ships, aircraft, precious stones, silver and non-monetary gold) the underlying trend in trade in goods was a widening of the deficit.
The UK has long been running a trade deficit, meaning that overall it imports more than it exports.
The chart below shows that the UK does sell more services abroad than are imported - but this is not enough to counter the bigger deficit in the value of the goods sold abroad, compared with the value of the goods imported.The chart below shows that the UK does sell more services abroad than are imported - but this is not enough to counter the bigger deficit in the value of the goods sold abroad, compared with the value of the goods imported.
ConstructionConstruction
The UK's construction industry seems to have recovered in August from a downturn that started just before June's Brexit vote. The latest Markit/CIPS UK Construction Purchasing Managers' Index rose to 56.1 from 45.9 in July, although the figure is still below the 50 mark that divides expansion from contraction. House building has slowed to a six-month low as costs have soared, due largely to a weaker pound.
The uncertainty over what happens next acted as a brake on the construction sector during August, especially in terms of house building, the survey suggests. However, a number of firms say that sales have held up better than had been expected. However, output in the construction industry overall has risen for the sixth consecutive month in February, led by civil engineering.
Significantly these figures also indicate the sector has seen a further steep rise in the cost of raw materials, with input costs now rising at their fastest pace since July 2011. Some firms say that rising input costs have had an effect on decision making and have led to delays in contracts being completed.
Jobs Jobs and wages
Although UK unemployment fell slightly to 1.62 million in the three months to October, economists warned there were signs the labour market had started to "cool off" since the Brexit vote. The unemployment rate has been falling steadily over the last five years, as the UK recovered from the global financial crisis, which saw up to two million jobs lost, according to one report.
In total, there were 31.76 million people in work, which was "slightly down on the record set recently", said ONS senior statistician David Freeman. Wages have been growing faster than inflation in recent months, though the gap is narrowing, leading to warnings of squeezed incomes.
"The labour market appears to have flattened off in recent months," he said. In the three months to January, regular pay increased by 2.3%, compared with the same period a year earlier. That was sharply lower than the 2.6% seen in the three months to December.
Nissan confirmed it would build both the new Qashqai and the X-Trail SUV at its Sunderland plant thanks to government "support and assurances", an announcement Theresa May described as a "vote of confidence". Meanwhile, inflation currently stands at 1.8%, up from 1.6% a month ago.
The Japanese company's commitment to Britain's biggest car plant had been in doubt following the EU referendum. Real income growth is now running at 0.6%.
One of Britain's biggest banks, Lloyds, has accelerated its job cuts, axing a further 3,000 posts - although it said it had made this decision before the referendum. "If the incomes squeeze translates into falling consumer confidence, then the main driver of the better-than-expected economic news since the referendum could turn more negative," says the BBC's economics editor Kamal Ahmed.
Elsewhere Japan's Softbank said it was buying the UK microchip-maker ARM Holdings for £24bn, and would double the number of staff in five years, pharmaceuticals firm GlaxoSmithKline is investing £275m in the UK, while McDonald's is creating 5,000 new jobs. Follow Tim Bowler on Twitter @timbowlerbbc