Scottish Daily Mail

Now experts admit Brexit may not lead to recession af ter all

- By Hugo Duncan Deputy Finance Editor

BRITAIN will avoid recession this year despite a ‘marked economic slowdown’ after the vote to leave the EU, experts say.

The economy will shrink by 0.2 per cent in the third quarter as worries about the impact of Brexit hit business investment and push up unemployme­nt, according to a report.

But the UK is expected to eke out growth of 0.1 per cent in the final three months of 2016 – avoiding a technical recession, defined as two consecutiv­e quarters of economic decline.

Simon Kirby, an economist at the National Institute of Economic and Social Research, which released today’s report, said a rerun of the Great Recession of 2008-09 is not on the cards.

‘I have not seen anything to suggest we are about to repeat that,’ he said, with NIESR expecting total growth of 1.7 per cent across 2016 and 1 per cent in 2017.

He added that a ‘marked economic slowdown’ was expected in the rest of 2016 and 2017, and there is ‘an evens chance’ of technical recession in the next 18 months.

But business leaders remain confident. James Sproule, chief economist at the Institute of Directors, said: ‘We are picking up from our members a mismatch between concerns about the wider economy, and a more confident outlook they have for their own performanc­e.

‘It is true some recent negative figures have been a cause for concern, but they are nothing like as bad as many forecaster­s expected… the UK still has many fundamenta­l economic strengths.

‘As time goes on, I expect businesses will start to shift focus on to what opportunit­ies can be found in Brexit.’

M&G Investment­s fund manager Richard Woolnough said the economy is ‘healthy’ and the fall in the pound ‘will provide an economic tailwind’ by boosting exports.

Major firms including McDonald’s, Boeing and GlaxoSmith­Kline have recently announced plans to increase investment and hire new staff. And Pendragon, Britain’s largest car dealership, yesterday said it was business as usual.

Chief executive Trevor Finn said: ‘We have not experience­d any noticeable change in our customers’ behaviour.’ He dismissed suggestion­s foreign car makers will put up UK prices to make up for the fall in sterling: ‘The message we are getting from car manufactur­ers is that the UK is the number two market in Europe and they wouldn’t want to give any ground to their competitor­s.’

In a further boost, a report by the pro-EU CBI today shows small and medium-sized manufactur­ers saw output rise in the past three months.

The NIESR report warns inflation is expected to peak at just over 3 per cent in late 2017 and unemployme­nt will rise to 5.8 per cent in the middle of 2017 before falling again. NIESR predicts that, over the next five years, the Government will borrow £90billion more than outlined by George Osborne in March.

But it says public finances will be boosted by £9.6billion in 2019-20 and £9.9billion in 202021 assuming Britain stops sending money to the EU.

John Longworth, former head of the British Chambers of Commerce, said: ‘Again and again … we will see business give a vote of confidence in the post-Brexit British economy now they are freed of Project Fear.’

‘Freed from Project Fear’

 ??  ?? Optimism: Trevor Finn, boss of car dealer Pendragon, says it is business as usual for the firm
Optimism: Trevor Finn, boss of car dealer Pendragon, says it is business as usual for the firm

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