Brexit is easing the UK into recession like an old man lowering himself into a hot bath – Business Insider

Brexit is easing the UK into recession like an old man lowering himself into a hot bath – Business Insider

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bathtub La Clique

Lisa
Maree Williams/Getty Images

LONDON — Ever since the
Brexit cliff failed to emerge
, Leavers have been celebrating.

The UK economy continued to grow after the referendum vote to
exit the EU a year ago. The Remainers were wrong: Apparently, we
can have a strong economy without being attached to the EU.

But now, with the first three months of the two-year Article 50
period gone and no concrete progress to show, we’re starting to
see economic data that backs up the theory that
the Brexit cliff will be more of a gentle, downward slope:

  • Business confidence is in decline.
  • The Purchasing Managers’ Index (PMI), a measure of intended
    business activity, is trending down.
  • And new car sales are in decline.
  • There is one thing that has gone up: the amount of cash
    businesses are storing in overseas bank accounts.

These are not good signs for the economy. True, it is not a
crisis. But we’re now at risk of the recession engulfing us
gradually, like an old man lowering himself into a hot bath,
getting used to it as he goes along.

GDP growth was 0.2% quarter-on-quarter in the most recent period.
That’s depressingly totemic because 0.2% is the same amount
Brexit might cost us. According to the CBI, the extra tariffs on
exports to the EU post-Brexit will slice between £4.5 billion and
£6 billion annually from UK GDP, or 0.2% to 0.3% per year.

To put it bluntly, does this look like a healthy economy to you?


Pantheon Macroeconomics
Pantheon Macroeconomics

Here are the PMIs, which closely track GDP:


PMI
IHS Markit

None of the individual PMI sectors are trending upward:


PMI
IHS Markit

And big-ticket consumption is trending down, too. Here’s the
chart for new car registrations:


PMI
Pantheon
Macroeconomics

On top of that, businesses are storing capital overseas. Foreign
currency is worth more against the pound after all …


Pantheon Macroeconomics
Pantheon Macroeconomics

… and you might also get more growth for your money in the EU,
which is trending up just as Britain tanks:


PMI
Pantheon Macreconomics

Prediction: As we head toward 2019, expect more business leaders
to start talking more loudly about the economic cost of
unhitching ourselves from our biggest single trade partner.

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