On Sunday it was 100 days since the UK voted to leave the EU.
After the initial horror show of plunging stock markets, you might be forgiven for thinking that not a lot has changed on the economic front. Certainly Brexiteers have been crowing about how Treasury lies and ludicrous warnings from the Governor of the Bank of England have come to nothing.
If anything, they argue, the economy has actually had a Brexit bounce. The FTSE 100 has gained £80 bn since British people voted to leave Europe, and the index of leading shares has almost broken through the 7,000 barrier.
Yet watching stockmarkets is a crude way to assess economic success. A more significant, and more worrying signal were the comments made by the chief executive of Nissan at the Paris Motor Show.
Carlos Ghosn said that Nissan was delaying investing in its Sunderland plant until the UK has concluded its Brexit negotiations. It was the first public admission from a British car maker that fears over Brexit are hurting investment decisions but Nissan has only said what a lot of manufacturers have been conveying privately.
Meanwhile, outsourcing companies have been admitting how badly they are faring in a post-Brexit world where companies and public sector bodies have been deferring and cancelling contracts. Mitie and Capita have seen their share prices fall by more than a quarter, after they revealed that trading was poor in the post-Brexit world.
So why do stock markets still keep climbing higher? Indeed why do barometers of the health of the economy – including manufacturing, services and retail figures – all appear to be positive?
There are good reasons why it does not yet feel like the UK economy is going to hell in a handcart.
For a start, Britain’s FTSE 100 index of leading companies has recovered strongly in part because of the devaluation of the pound.
But this index is chock full of international businesses who have little or no UK operations and whose earnings have been flattered when translated into (now weaker) sterling. In dollar terms, the FTSE 100 is actually lower since before the Leave vote. Meanwhile, the FTSE 250 index, which has more genuinely British businesses, has not performed as well as the FTSE.
All companies have also been helped by the Bank of England’s swift move to cut interest rates and its “Brexit bazooka” policies, which effectively saw the Bank return to the policy of printing money first used during the financial crisis of 2008.
We are now living in an environment where interest rates are at record lows all around the world. Big pension funds, insurance companies and individuals have to put their savings somewhere – it is not surprising that stock markets look a better bet than the bank right now.
Next week the Bank of England will begin buying corporate bonds - from the likes of aeroengine maker Rolls-Royce, Thames Water and National Grid, inevitably stock markets will value those companies higher.
Brexiteers have also pointed to the number of takeover deals done in the last three months, saying they show that the UK is still attractive to investors. The deals may be up by 25% on last year, but that is largely down to one huge deal, the takeover of ARM Holdings by Japanese conglomerate Softbank which in itself was helped by the weakness of the pound. The near 31% plunge in sterling seen after the vote, has made British companies look suddenly cheap to US and Asian buyers.
There are also reasons to explain why retail sales, manufacturing and services performed better than expected. For instance, petrol prices remain low – because of global low oil prices – which immediately puts money in people’s pockets. Prices for clothing are still falling in shops, encouraging shoppers to buy in the short-term.
Essentially, it is just too early to know the full effect of Brexit.
Nothing has actually happened yet and many of the potentially malign effects that will be seen from Brexit tend to be lagging indicators. Unemployment is just such an indicator.
Nevertheless, the Bank of England’s agents – the Bank’s early warning system – has already reported signs that employers are going slow on hiring.
Businesses and their managers are understandably confused. This week more than two-thirds of 100 chief executives polled by KPMG said they believed that their business and the economy would prosper over the next three years. Yet three-quarters of them said they admitted to “contingency planning” and looking at relocating to a European base.
Concerns that Britain is heading for a “hard Brexit” - in other words will have no access to the European single market or the European customs union – are worrying the City.
Passporting – which allows UK-based financial institutions to operate anywhere in the European Union – would end under a hard Brexit scenario and while it is true that the City is resilient and has reinvented itself many times, it is harder to imagine this happening in an environment where banks are, rightly, under extreme regulatory strictures and required to run businesses with hefty capital cushions.
Over time the uncertainties of the exit process will be absorbed by companies, British or otherwise, and will influence their investment and hiring decisions.
Increasingly companies that invested money in Britain because it allowed them to trade easily within the European Union, will look at other countries like Ireland or Spain.
Britain ranked its highest in league tables for global competitiveness in a decade last week, according to the World Economic Forum. That achievement is now at risk.
We may not yet have tipped ourselves into a DIY Recession, as George Osborne warned, but storm clouds still loom.
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