Nonetheless, these GDP figures have confounded the ‘doomsday’ predictions that many of those campaigning for the UK to remain in the European Union issued last year. The former chancellor, George Osborne, warned that Brexit could cause a ‘DIY recession’, leading to a sharp rise in inflation, with house prices likely to rise by 10 per cent. He also calculated growth would be 3.6 per cent lower than if Britain voted to remain in the trading bloc. Other scaremongering predictions included the economy shrinking by 6 per cent by 2030 and Britain becoming ‘permanently poorer’, as each household would lose £4,300. According to the former Tamworth MP, the main cause of this would be if the Department for Exiting the European Union arranged a Canadian-style free trade agreement.
George Osborne warns of “DIY Recession”.
However, these claims culminated in Mr. Osborne’s credibility being shattered moments after last year’s referendum. The recent GDP figures prove that, regardless of the slowdown in growth figures, Britain has not experienced another recession. House prices have not risen by 10 per cent. Brexit enabled house prices to temporarily rise. Since June 2016, the average house price rose to £300,000, whereas in London, an average property now costs £700,000. Of course, this is not spectacular news for young couples hoping to climb onto the housing ladder. House price growth is likely to remain fixed at 2.8% this year and 3.8% in 2018. But if the Government continues to invest in new houses and strip back regulations that prevent the housing market from expanding, house prices will rise at a steady pace. So far, they prevent under-40s from entering the property market. Either way, it is positive news in the long-term for many people, assuming building companies can meet the Government’s targets.
The point is that the British economy has not crashed to the extent the former chancellor made out. It continues to remain resilient, despite the terrible news people hear from the mainstream media. This is a credit to the UK economy’s strength. Many businesses and experts should be optimistic about the opportunities that Brexit will offer them.
Consumer spending is likely to be squeezed by rising inflation and falling living standards, causing the economy to slow down due to the uncertainty sparked by Britain leaving the European Union. The Chancellor, Philip Hammond, said in his autumn budget that he would offset weaker household spending and delayed investments by companies anxious about Brexit.
Yet John Hanksworth, the chief economist at PwC, said that whilst Brexit is restraining many households from spending more money and that there are many downside risks due to Britain’s European Union exit, there are also many opportunities assuming negotiations run smoothly and the eurozone continues to recover. He was also equally surprised by the resilience of the UK economy following last year’s referendum, with growth rates of 0.6 per cent and 0.7 per cent in the third and fourth quarters of 2016 respectively. The economy’s overall growth rate may dip to 1.5 per cent this year, a decrease from 1.8 per cent last year, and then 1.4 per cent in 2018. Growth may be slowing, but at least it has not collapsed altogether. Former prime minister David Cameron warned of a ‘Great Brexit Recession’ if the UK voted to leave the European Union; this is yet to happen.
Instead of a slowdown in consumer spending and economic growth triggered by Britain’s departure from the European Union, economic analysts and Treasury experts need to focus on two main factors that will have a more significant impact on the British economy than Brexit. The first one is the collapse in negotiations. The European Union’s chief negotiator, Michel Barnier, warned that it is unlikely he will be prepared to commence trade talks in October due to emerging disagreements on the rights of EU citizens residing in the UK. Even if talks collapse, that is not a reason to be pessimistic about the UK’s prospects outside the European Union.
Many British and foreign companies choose to relocate to London due to its easy access to European markets and the UK’s membership of the European Union’s Single Market. Many companies fear that if Theresa May walked away from the Brexit negotiations, trading under World Trade Organization rules would lead to tariffs being slapped onto British and European Union goods. The tariff under World Trade Organization rules is 3 per cent. This will not have a detrimental impact on traders. The United States and China both trade with the European Union under World Trade Organization rules. These two nations prosper due to their freedom to trade with other countries and pursue their own trade deals.
Despite this, the good news for many British and foreign companies is that the Cabinet has resigned itself to remaining a member of the Single Market until 2022 the latest, as part of a transitional deal. This could help ease many of their anxieties.
The other possibility analysts should fear is the collapse of the Italian economy. The eurozone may be recovering, but many Italian banks could lose significant amounts of money due to the uncertainty caused by last year’s referendum. If Brexit does not cause the European Union to collapse, the eurozone will. Other Mediterranean countries like Spain and Greece are also slowing down.
Regardless, there are many reasons to continue to be optimistic about Britain’s economy. It has surprised many by continuing to grow. It is time to look beyond Europe for chances to expand British trade. The UK still made the right choice with Brexit. It is the European Union’s future that is unclear.