Brexit bogs down British economy
• Eurozone streaks ahead after strong recovery
Britain’s economy is ending 2017 lagging the eurozone’s strong recovery as the effects of the Brexit vote weigh on shoppers and businesses, according to data released on Tuesday.
The UK’s economy ends 2017 lagging the eurozone’s recovery as the effects of the 2016 Brexit vote weigh on shoppers and businesses, according to a raft of figures released on Tuesday.
The dominant services sector lost some momentum in November while prices charged by companies rose at their fastest pace in nearly 10 years, potentially adding to the country’s inflation problem, a closely watched survey showed.
Another report showed shoppers spent more of their budgets on the rising cost of food, while car sales fell in November, for the eighth month running. Britain’s economy withstood the initial shock of the Brexit vote, but has slowed sharply as the pound’s plunge since the referendum pushed inflation up and hit households at a time when wages are growing sluggishly.
Companies have meanwhile slowed investment as they wait to see what leaving the EU means for them, potentially adding to Britain’s weak productivity growth — another drag on the economy.
Prime Minister Theresa May failed to clinch a deal on Monday to open talks on post-Brexit free trade with the EU after a tentative deal with Dublin to keep EU rules in Northern Ireland raised the ire of her political allies in Belfast. The monthly IHS Markit/CIPS services purchasing managers’ index (PMI), covering businesses from hotels to hairdressers, fell to 53.8 in November from 55.6 in October. Taken along with a pick-up for the smaller manufacturing and construction sectors, November’s PMIs suggested the economy was likely to see robust quarterly growth of about 0.45% in late 2017, IHS Markit said.
But businesses were downbeat about economic prospects. The composite PMI of British services plus manufacturing fell to 54.9, a long way short of the eurozone’s 57.5, its highest since April 2011.
“The eurozone is going great guns at the moment and it will almost certainly outpace the UK this year and next,” said Investec economist Philip Shaw. Chris Williamson, an economist at IHS Markit, said the big news in the
COMPANIES HAVE MEANWHILE SLOWED INVESTMENT AS THEY WAIT TO SEE WHAT LEAVING THE EU MEANS FOR THEM
services survey was the jump in prices charged by companies.
They had hit their highest level since February 2008, and the second-highest since the survey began in 1996. That is likely to be a worrying sign for the Bank of England, which has said inflation has probably already peaked and has signalled only a gradual rise in interest rates after it raised borrowing costs for the first time in a decade in November.
“Rising oil prices were again to blame in November, with firms also reporting the need to pass higher costs of a wide variety of other inputs on to customers as a result of the weak pounds,” Williamson said. “As such, the survey data suggest that inflationary pressures have yet to peak.”