Issue of the week: a bazooka for the economy?

Whether or not Brexit is to blame, Britain is edging closer to recession. What should be done?

The Government’s preparations for a no-deal Brexit “sometimes sound as if they have come from the imagination of a pulp-fiction novelist”, said The Economist. Matt Hancock, the Health Secretary, boasts that, in an effort to ward off medical shortages, “he is now the world’s largest buyer of fridges”. Meanwhile, one online outfit is offering a “Deluxe Brexit Box” containing “157 portions of not very appetising meals” for £595. “What better way to watch the riots than with a packet of freeze-dried beef and potato stew?” Unfortunately, these preparations are no longer just theoretical, which makes the latest dire economic statistics all the more worrying. Government figures suggest that the UK economy expanded by only 1.4% last year – its slowest pace since 2012 – and “actually contracted in December”, said The New York Times. That’s not a great position in which to find yourself “amid gnawing fear of crashing out of the EU without a deal”.

It was “hard to put a positive spin” on these figures, “so kudos to the Chancellor” for trying, said Philip Aldrick in The Times. The economy is “fundamentally strong”, Philip Hammond tweeted – before caving in and admitting that it was “being overshadowed by uncertainty over Brexit”. Others in government and the City point to the impact of a drop in global activity – particularly in Europe. Brexit uncertainty, some argue, is probably only a secondary factor in this slowdown. But the figures this week were “so dismal” that they cannot be easily dismissed. “The UK is not in recession, but it may be only a matter of time.” Manufacturing contracted in all but one quarter last year and Britain’s services sector, accounting for four-fifths of GDP, delivered its slowest annual growth since 2010. Worse, what little growth we have looks fragile. “In a detail that will infuriate small-state Brexit libertarians, the economy was propped up by government spending in the three months to December.”

“With clockwork predictability” analysts are already blaming Britain’s slowdown “on the approaching Brexit cliff edge”, said Ambrose Evans-pritchard in The Daily Telegraph. Yet anyone who thinks “they can separate Brexit effects from the parallel effects of monetary tightening, a eurozone slump and a world trade recession must be smoking powerful weed”. Regardless of Brexit, this slowdown must be tackled. The Government already has a list of “shovel-ready” projects that are badly needed, covering railways, ports, roads, power plants and broadband. Nobody believes in “austerity for its own sake” any more. And borrowing is still cheap. “So let rip, Chancellor Hammond. Blast your way through the global downturn.”