The official remain campaign made some extravagant claims for the impact of a decision to leave the EU in 2016. Whilst there were some immediate and deleterious effects, notably the depreciation of Sterling, the apocalypse failed to turn up at once. There are two major reasons for this: prompt action to maintain confidence in Sterling and the UK economy by the Bank of England and the fact that the UK would remain in the EU for a minimum of two further years. However, with the decision to issue A50 notice in March 2017 and the chaotic handing of the Brexit “process” (which dignifies it too much), businesses large and small are having to prepare for leaving the EU and the prospect that a transitional deal will not be possible.
According to the Office for National Statistics (ONS), the UK economy grew at 0.1% in Q1 2018, this is the weakest growth of any developed country. Prior to the Brexit vote, the UK had the fastest growing economy in the G7.
The poor growth data has been blamed on a sharp drop in construction activity and sluggish manufacturing output. The effect of an unusually cold snap in March is thought to have made little impact. Construction output declined by 3.2% in Q1 over the Q4 figure and manufacturing growth came in at 0.2%
The government points to the fact that unemployment is at a 40-year low and the economy has managed consecutive quarters of growth since 2010. The value of Sterling fell back on the news, falling by one and a half cents against the Dollar as analysts expect it to delay a planned increase in UK interest rates. An interest rate hike would likely reduce inflationary pressure, but may also reduce growth by making business borrowing for expansion more expensive. However, how true this is when borrowing is near historic low values remains to be seen.
Commenting on the data, the ONS’s head of national accounts, Rob Kent-Smith noted: "Our initial estimate shows the UK economy growing at its slowest pace in more than five years with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly. While the snow had some impact on the economy, particularly in construction and some areas of retail, its overall effect was limited with the bad weather actually boosting energy supply and online sales."