Ignorance abounds about the consequences of the UK’s decision to leave the EU. The decision was taken on 23rd June 2016 and it did cause an immediate fall in Sterling (taking it to a fresh 31 year low against the US Dollar) and markets fell, but then rebounded. This was predictable, if you believed that the UK would vote to leave – so much so that Crispen Oden (a London-based hedge fund manager and Leave backer) made £220 million betting on it. For most analysts, the logic of remaining in the EU was overwhelming, so little serious thought went in to what would happen in the immediate aftermath.
Britain remains a member of the EU and so has free access to the world’s largest trading bloc and will do until the end of March 2019. However, the fact that Sterling has dipped further on the news that a date has been set (UK courts notwithstanding…) for Mrs May to trigger Article 50 using the Royal Prerogative is a portent of things to come.
The IMF now predicts that the UK will emerge as the fastest growing G7 economy of 2016 (which is mistakenly heralded by Brexiteers as meaning all of the economic predictions are wrong). It is predicting that the UK GDP will grow by 1.8% this year, but maintains that the economy will slow next year as Brexit realities become clearer, predicting 1.1% growth and thinks that global growth will come in at 3.1%. IMF chief economist Maurice Obstfeld noted: "Taken as a whole, the world economy has moved sideways. Without determined policy action to support economic activity over the short and longer terms, sub-par growth at recent levels risks perpetuating itself." He pointed out that the lower value of Sterling will hit living standards in the UK since the cost of imported goods will rise. The IMF believes that UK inflation could rise from 0.7% this year to 2.5% next.
The key economic indicators for the post EU UK economy will be the inward investment figures and hiring intentions.