{"id":7244,"date":"2019-02-07T18:58:52","date_gmt":"2019-02-07T18:58:52","guid":{"rendered":"http:\/\/www.styledeals.co.uk\/blog\/brexit-stalemate-scars-prosperity-says-bank-of-england\/"},"modified":"2019-02-07T18:58:52","modified_gmt":"2019-02-07T18:58:52","slug":"brexit-stalemate-scars-prosperity-says-bank-of-england","status":"publish","type":"post","link":"https:\/\/www.styledeals.co.uk\/blog\/brexit-stalemate-scars-prosperity-says-bank-of-england\/","title":{"rendered":"Brexit stalemate scars prosperity, says Bank of England"},"content":{"rendered":"\n
\n
<\/p>\n

\"MarkImage copyright<\/span>
\n PA<\/span><\/p>\n

<\/span><\/p>\n<\/figure>\n

According to the Bank of England’s latest assessment, the uncertainty of the last few months has left the UK in the weakest growth environment since the crisis – and those scars will linger.<\/p>\n

It confirms that both growth and inflation <\/a>at the end of last year is weaker than it previously thought and it is looking for growth of 1.4% in 2018.<\/p>\n

Brexit uncertainty has weighed on both business investment and household activity – although the latter to a lesser degree. <\/p>\n

While the Bank’s own investigations reveal about half of businesses have put contingency plans in place, spending in other areas has suffered. <\/p>\n

Growth in the US, China and in particular the eurozone (which was only about as half as strong as the Bank previously predicted) is also weighing. <\/p>\n

And when it comes to the cost of living, we have lower oil prices to thank for weaker inflation, which will drop below the 2% target in the next few months before slowly rebounding<\/p>\n

‘Deal dividend’?<\/h2>\n

So as we eye the UK’s exit from the EU in just 50 days time, the backdrop is pretty subdued. <\/p>\n

And the Bank’s best stab is that it doesn’t get much better quickly, even if a deal is struck in the coming weeks.<\/p>\n

Its assumption is that the UK exits on March 29 with a deal and – crucially – that there is a smooth adjustment to that new era: That households, businesses and markets take the new arrangements in their stride. <\/p>\n

The caution currently surrounding spending. – corporate and by consumers – could ease – the so-called deal dividend. <\/p>\n

Even in that case, which, realistically, would appear to be a best-case scenario for growth, the economy would expand by just 1.2% in 2019 – the weakest rate in the post crisis era. <\/p>\n

There is in fact, the Bank says a 1-in-4 chance the economy dips into reverse by the autumn. The decline in business investment it thinks will linger, contracting by a further 2.75% this year, damaging productivity. <\/p>\n

And a weakness in our trading partners would cause export growth to drop to just 1% this year, less than half the rate previously expected. <\/p>\n

Options open<\/h2>\n

But even the Bank acknowledges the Brexit outcome could be very different. <\/p>\n

What if there is no deal, or heightened uncertainty? <\/p>\n

It’s had a stab at assessing how the economy might react. And it’s clear from that it would face a dilemma. <\/p>\n

A disruptive no-deal scenario could cause the pound to weaken further, pushing up import prices, and so the cost of living. Even a 5% drop in the value of sterling could cause inflation to be. about a half of one percent above the Bank’s target in two years time. <\/p>\n

That – and a desire to restore confidence in sterling – might prompt it to raise in interest rates. On the other hand, the Bank reckons heightened uncertainty – for example in the event of a no deal – could knock growth down by around a third, to just 0.8% this year – and next. <\/p>\n

There’d be a temptation there to lower rates and support activity and jobs. But the Bank admits rates could move “in either direction”. It is keeping its options open. <\/p>\n

Watching and waiting<\/h2>\n

Whatever happens next, it is evident that activity has taken a knock in recent months, damaging prosperity. <\/p>\n

Despite the weaker growth outlook however, higher rates might still be looming if a deal is struck. <\/p>\n

The Bank has forecast that the recent improvement in wage growth will filter through the economy, pushing inflation above target in two years. <\/p>\n

It has, therefore, maintained its mantra of “slow and gradual” rate rises – if things pan out. <\/p>\n

But, for the moment, the rate setters hands are tied – like the rest of the world, all they can do is watch, and wait, as the latest act of the Brexit drama unfolds.<\/p>\n<\/p><\/div>\n


\n
Source<\/a> by [author_name]<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Image copyright PA According to the Bank of England’s latest assessment, the uncertainty of the last few months has left the UK in the weakest growth environment since the crisis – and those scars will linger. It confirms that both growth and inflation at the end of last year is weaker than it previously thought … <\/p>\n","protected":false},"author":0,"featured_media":7245,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-7244","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/posts\/7244","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=7244"}],"version-history":[{"count":0,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/posts\/7244\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/media\/7245"}],"wp:attachment":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=7244"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=7244"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=7244"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}