Brexit fallout a puzzle — but don’t despair

N Radio 4’s Today programme early yesterday morning, a couple of City economists were giving their opinion on what second-quarter growth figures were likely to say about the health of the economy when they were published later in the day.

They guessed away, with the fluency for which pundits are known, in the full knowledge the growth figures they were talking about are notoriously unreliable, often misleading and usually subject to substantial revision. This is because the statistics from which they are compiled do not, at this stage, come from the recording of actual events but in the main from surveys about what people in business think — what they feel is happening in their business.

No one is particularly happy with this, but it is a compromise. Collecting economic statistics is a hugely complicated, costly and timeconsuming exercise. Thus if you want timely data, you have to cut corners to get it out quickly; if you want accurate data, you have to spend so long collecting it that it is no longer much use by the time it comes out. So we work on the basis of a trade-off between speed and accuracy.

But there is an alarming tendency for people who should know otherwise to pretend this is not the case. Yesterday was all too typical. The programme’s listeners were

Anthony Hilton

subject to guesswork dressed up as facts — economists speculating about the possible message to be delivered by speculative numbers that have been culled from opinion polls. Then, based on what yesterday’s report would “tell” them about the economy, they further speculated about whether or not the Bank of England would lower interest rates next month — when its meeting does not even take place until next week.

These people should get a life and go to the beach. You have to think their clients’ money would be a lot safer if they did.

But even that is less irritating, perhaps, than statements issued yesterday by an organisation called Vote Leave Watch, whose mission seems to be to highlight the flaws in the arguments of those who campaigned for Brexit. Its ammunition yesterday was the CBI’s distributive trades survey, which appeared to show the sharpest fall in sales since January 2012. This prompted the Leave watchdog to say: “Vote Leave promised the British people that Brexit would boost our economy and create 300,000 new jobs. As this survey makes clear, this promise is not worth the paper it was written on.”

Unfortunately, and speaking as one who voted to remain, that statement is just plain silly. The sales slump may be the result of uncertainty following the unexpected result but it might also reflect the lousy weather in June, the nervousness caused by terrorist attacks, the fact that people stayed in to watch the football — or maybe someone in the back office added the numbers up wrong. You should never rely on one month’s data for anything because you cannot separate the message from the background noise.

But even if the fall turns out to be entirely the result of Brexit-driven uncertainty, it still does not prove the claims that David Davis and Boris Johnson lied in saying Brexit would deliver growth. The referendum was four weeks ago, and it is far too early to be sure about anything. Frustrating though it may be, we may have to wait years to know whether the decision was good or bad in economic terms. Even then, who cares because the real case for cooperation in Europe is to support and promote its cultural, social and democratic values — and that certainly has been blown.

Then there is the further problem with crying wolf now on the basis of flimsy evidence. As the fairy tale warns, it means there will be no one left paying attention if and when real figures do come along that indeed suggest Brexit is a seriously bad idea.

Meanwhile, there are some glimmers of light — although you would not guess it from the City and media coverage. Equity Capital for Industry, a private-equity house that celebrates its 40th birthday this year, maintains a register of those highgrowth, mid-sized companies in which it likes to invest and which it believes are the key to Britain’s future. It polls them every year and the fieldwork for this year’s survey was done immediately after the Brexit vote, although the full results will not be published until the autumn.

The figures, even in rough-cut form, are instructive because they paint a picture of businesses which, although they do not like what has happened, are nevertheless geared up to meet the near-term challenge. For instance, more than two thirds of the companies polled expect revenues to increase this year, and one in eight is looking for a gain of more than 20%. Fewer than 10% expect revenues to fall but, despite this generally optimistic picture, the possibility of an economic downturn is now the dominant fear.

The interesting thing, however, is how many intend to grow their way through the troubles, with almost 30% planning significant increases in investment and hiring compared with fewer than 20% contemplating a freeze or a cut. This is despite the fact that most think funds will be much harder to come by in the next 12 months. ENERALLY speaking, there is limited enthusiasm for the new markets of India, Africa and South America compared with what might be lost in Europe, and the firms worry continually about skills shortages. This, of course, is the reality of contemporary business life, which is why it is also no surprise that an overwhelming majority of 85% of the companies are seriously concerned they may lose access to the single market and 52% are desperate to maintain access to the free flow of European labour

So the message from this cohort of the business world — one crucially important to the country’s future — is that there are difficulties but there is certainly no despair.