Regular readers of this blog and followers on Twitter know that I am always very sceptical about tabloid headlines suggesting that Brexit Britain enjoys some sort of economic boom since the disastrous referendum vote in June 2016 to leave the European Union, the largest free trading block in the world and right on the UK’s doorstep, not the other end of the world!
A quick read of such articles quickly reveal that what they really mean is that the economy has not collapsed to the extent to what they sneeringly call ‘Project Fear’ predicted. If one cares to read beyond the inflated headlines even the Express usually admits somewhere towards the end of the article, that actually in the years leading up to the referendum the UK growth figures were much more impressive!
In Great Britain the government department charged with monitoring the UK economy is the ‘Office for National Statistics’, ONS for short.
In the western world economic prowess is usually expressed as a yearly growth percentage of ‘Gross Domestic Product’ (GDP).
GDP growth is also the main indicator of economic performance quoted by the UK’s Government. This is then briefed and picked up by newspapers and blogs and reported upwards to supra-national organisations for aggregation at regional level like EU, OECD, IMF etc.
In their quarterly reports ONS further breaks GDP down to sectors like ‘Services’, ‘Manufacturing’, ‘Mining’ and ‘Agriculture’ to name a few.
How well the UK is doing financially out of all this economic activity is generally reported just once a year when ONS publishes the UK’s national accounts in a publication referred to as ‘The Pink Book’. Here you can find if Britain PLC runs a trade deficit or surplus with its main trading partners at country level. For brexit watchers like myself they also neatly split all this in EU-trade and trade with the non-EU rest of the World (ROW for short).
Brexit joy at UK GDP boost thanks to Q3 manufacturing convulsion
Let us dissect one recent headline that Brexit Britain is experiencing some sort of post Brexit Manufacturing Boom. Note that more often than not the anti EU press will be quoting something called the ‘Purchasing Managers Index (PMI)’. Note you can usually discount this index for reasons explained here. It’s based on small surveys that are usually out of touch with reality. This is then picked up by pro-brexit Twitter accounts (some of them Russian bots) as follows:
The Brexit vote in the UK didn’t happen all that long ago. A quick look at the five quarters that ONS reported on since June 2016 and picking out the ‘manufacturing’ part of each reported ‘Production’ quartal GDP figure leaves us with the following aggregate UK manufacturing growth since the referendum.
-1.0 % – 0.0% +0.3% – 0.4% + 1.0% = – 0.1%
This means UK manufacturing since Brexit down by one tenth of a percent Dohhh! Not Booming and not Massive! A small 3 months 1% surge after a 15 months 1.1% drop!
OK that’s the post Brexit manufacturing boom dismantled. Let us now turn our attention to the first full set of UK national accounts since the brexit vote. Remember the 2016 pink book had two quarters before the referendum in it. The 2017 edition is the first full year reported where we can really say that the brexit decision ( if not the real thing yet) was fully factored into the UK’s national accounts.
We need to remind ourselves that part of the Leave narrative peddled by the likes of Dan Hannan MEP and others is that the EU’s share of Global GDP is “in decline” and anyway the UK now trades more, and more profitably with the non-EU ROW. So it would be a bit of a tabloid headline shocker if they had the guts to report that:
Brexit Shock Horror:
UK goods exports to EU grew at a slightly faster rate than exports to non-EU!
“Although the value of UK exports of goods to non-EU countries exceeded goods exports to the EU (by £11.1 billion) in 2016, UK goods exports to the EU grew at a slightly faster rate than exports to non-EU countries – at 4.8% and 4.5% respectively in 2016.”
Now for our next brexit headline shocker……
Brexit Shock Horror:
Deficit with non-EU areas widened to the largest recorded in the series history!
“Meanwhile, the primary income balance deficit with non-EU areas widened to the largest recorded in the series history, which started in 1999 (1.6% of nominal GDP). This was driven primarily by a rise in investment income”paid by the UK, which rose to 5.6% of nominal GDP and a slight reduction in UK investment income earned.
abroad to 3.9% of nominal GDP.”
Do we really need to Brexit:
Primary income deficit with the EU narrowed to 0.9% of nominal GDP, the lowest in seven years!
“The primary income deficit with the EU narrowed to the lowest level in seven years (0.9% of nominal gross domestic product (GDP)). This was a result of income earned on UK investments in the EU increasing to 3% of nominal GDP, the highest in three years and income earned on EU investments in the UK remaining broadly stable.”
More Brexit shockers:
UK’s goods deficit with non-EU countries widened in 2016 for the first time since 2011!
“UK’s goods deficit with non-EU countries widened in 2016 for the first time since 2011, as a result of a larger increase in imports in relation to exports – 7.7% increase in imports compared with 4.5% increase in exports. The UK’s goods balance deficit with non-EU countries widened by £7.3 billion to £38.9 billion in 2016. This might suggest that the extent of overseas demand for UK products may have been limited by prevailing global economic conditions”
I might add that poor Dr. Liam Fox may have his job cut out for him replacing growing EU exports with equivalent ROW exports after brexit.
I sincerely hope that I haven’t shattered accidentally visiting Leave voters’ high hopes for a rapid brexit trade bonanza with the non-EU rest of the world with ONS reported reality.
You can draw comfort that Donald Tusk, President of the EU Council of Ministers repeatedly assured UK negotiators and press that Article 50 can be revoked.