We got it wrong on Brexit gloom, economists admit
Buoyant British economy is set to power past France by 2020
‘Politically motivated’
BRITAIN’S economy is now predicted to overtake France’s in 2020 as experts admitted they had been too gloomy over Brexit.
The Centre for Economics and Business Research (CEBR) had claimed the economy would slow down because of a drop in consumer spending and investment.
But last night the think-tank admitted it had got this wrong, saying: ‘In practice this has not happened.’
Its economists accepted the fears they expressed last year that Brexit would leave the UK behind the French economy for five years were exaggerated.
They concluded that, despite fears of a ‘Brexodus’ of financiers, the City has actually increased its lead as the world’s financial centre since the referendum.
The CEBR said that a trade deal with Brussels looked more likely after Theresa May agreed a transitional deal with the EU earlier this month.
It said Britons should expect lower inflation and higher wages over the next few months, easing pressure on family finances. And the think-tank predicted the UK – now the world’s sixth-largest economy – will overtake France in 2020, a year earlier than it originally forecast.
However, it will also be overtaken by India and then by Brazil, making Britain the seventh-biggest economy by 2028.
Last night Tory MPs hit out at economists for their gloomy forecasts over the Brexit referendum. Andrew Bridgen said: ‘As we know from Project Fear, the main function of economists is explaining why their last forecast was wrong.’
And Jacob Rees-Mogg added: ‘ Many forecasts are honestly wrong, but unfortunately many of the forecasts around Brexit were politically motivated and have undermined trust in the probity and impartiality of those making them.’
Every Christmas the CEBR ranks countries according to the strength of their economies and how they are expected to fare in the years ahead. The UK fell behind France in 2017 as the value of the pound fell after the Brexit vote. But the CEBR said the currency has bounced back quicker than expected.
Its economists praised Britain as a leader in technology and creative industries, adding: ‘Despite continuing uncertainty it is increasingly clear that the shape of the UK’s departure from the EU will be a relatively “soft” Brexit.
‘Agreement has now been reached with the other EU member states on much of what will happen and the separation looks likely to be fairly gentle.
‘We expect inflation to fall by the beginning of 2018, as the effects of the pound’s post-EU referendum depreciation wear off. We also anticipate an uptick in earnings growth driven by the historically low levels of unemployment.
‘These two factors will go a long way in easing the pressures on household budgets, and will boost private consumption which is key to the UK’s future growth. Ian Stewart, of accountants Deloitte, said: ‘Despite the huge focus we have seen on how much uncertainty there is, Britain remains a very good place to do business.
‘We are not seeing the apocalyptic slowdown which some feared would happen at the time of the referendum or any signs of a derating of our competitiveness. It is still early days, but the reality is better than a lot of the commentary suggests.’
The centre also admitted the US was doing better than predicted under Donald Trump, with tax reforms passed last week set to provide a major boost to growth.
This has slightly pushed back the prediction for when its economy will be overtaken in size by China’s, from 2029 to 2030.
Russia’s economy is set to slip in the rankings to 17th by 2031, with the report blaming its hostile attitude to foreign businesses and a failure to reduce its dependence on oil under Vladimir Putin.