Britain has World's Top Economy after Brexit
Friday, 06 January 2017

Britain ended last year as the strongest of the world’s advanced economies with growth accelerating in the six months after the Brexit vote, it was revealed overnight.

Business activity hit a 17-month high last month, meaning that the economy grew by 2.2 per cent last year — more than the six other leading nations, including the US, Germany and Japan.

Far from slowing after the referendum in June, as predicted by the Treasury and Bank of England, growth appeared to have improved. GDP grew at 0.3 per cent and 0.6 per cent in the first two quarters of last year, compared with 0.6 per cent and an estimated 0.5 per cent in the final period.

Andrew Haldane, chief economist at the Bank of England, suggested that economic forecasters were facing a “Michael Fish moment” over their mistaken predictions, referring to the BBC weather forecaster. Mr Haldane, comparing the profession’s failure to spot the 2008 recession to Mr Fish’s infamous assurance of “no hurricane” on the eve of the great storm of 1987, said: “It’s a fair cop to say that the profession is to some degree in crisis.”

He also admitted to shortcomings in pre-Brexit predictions, saying that “the data has surprised to the upside”.

He insisted that the Bank’s errors were “more a question of timing than of a fundamental reassessment of the fortunes of the economy” and warned that inflation would squeeze household incomes this year. He said that a slowdown was still likely. The Bank is forecasting growth in 2017 of 1.4 per cent, which would put the UK in the middle of the G7.

Steve Baker, the Brexit-supporting MP, said that the performance of the economy since the referendum was a reproach to those who warned of dire consequences. “This is another moment to reflect that the horror stories that we were told simply didn’t come to pass,” he said.

An assessment by Cambridge University criticised “flawed and partisan” Treasury forecasts of Britain’s economy outside the EU. Only one, the fall in sterling, had proved correct, according to the Centre for Business Research. Treasury predictions on the prospects of trade outside the EU came in for particular criticism in the academic assessment published last month.

“We have looked very carefully at what the Treasury has said about this and we find its work very flawed and very partisan. It is not objective,” Graham Gudgin, one of the authors of the report, said.

Britain’s robust performance means the economy heads into 2017 on solid ground. James Knightley, UK economist at ING Financial Markets, said that it “indicates that the UK economy has strong momentum”.

The purchasing managers’ index survey of business activity across the services, construction and manufacturing industries also pointed to further hiring by companies. It was released before official GDP data for 2016 as a whole on January 26.

Recruitment across all three industries accelerated at the fastest pace in 11 months and, in a positive sign for the months ahead, new orders in the services sector, which accounts for four fifths of the economy, hit a 17-month high.

 



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