Brexit and the economy

Some broadcasters, such as the BBC’s Martine Croxall on News24,  have argued that the Leave campaign might be have been right to predict that the economy hasn’t “fallen apart”, as the Remain lobby expected. The BBC has also set up a page to assess the impact of the referendum vote. It rightly notes that “we have not yet seen any data (to suggest that) companies have already started cutting back on investments following the vote to leave the European Union”.

The reason for this is that, irrespective of which assessment is proven right, we are unlikely to have definitive data for many months. The first estimate of Q3 GDP (covering the first quarter to be affected by the vote) will not be published by the ONS until October 27. This will be the first assessment of the impact on total production. The first estimate of the impact on investment and trade will not be available until November 26. In the meantime, we will have to rely mostly on surveys and anecdotal evidence. These include the monthly Consumer Confidence Index, the monthly Purchasing Managers’ Index for manufacturing, construction and services and the reports of the Bank of England’s Agents reflected in the Monetary Policy Committee minutes.

Some monthly data such as the Index of Industrial Production and labour market data will be available sooner, though industrial production accounts for only 15 per cent of total UK output and the labour market tends to lag activity by a number of monthsONS data for industrial production for July will be published on September 7 and ONS data on the unemployment rate and wage data for July will be published on September 14. There will also be monthly data on the public finances, with July numbers available on August 22.

In the meantime, the collapse in the pound to a 30-year low,  the downgrading of UK public debt and statements by employers about scaling-down employment and investment may offer an indication of current conditions and things to come. But the hard data on the economy will not be available for many months. By the end of the year we will begin to have a clear picture of the impact of the vote and the ensuing uncertainty over the summer months, but earlier assessments will remain speculative.

Until then, the lights will not go out, supermarket shelves will not empty, and factories and offices will continue to operate. To paraphrase Michael Bloomberg: in God we trust, for everything else give me data.

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Dimitri_ZenghelisDimitri Zenghelis is co-head of climate policy at the Grantham Research Institute on Climate Change and the Environment at the LSE. He is also an Associate Fellow of the Energy, Environment and Development Programme at Chatham House.