Today’s economic results reveal that the economy fared much better than predicted immediately after the Brexit vote, with the services sector growing by 0.4% in July. I am pleasantly surprised by the results, having assumed the worst when the shocking news that the UK had chosen to leave the EU was announced on the morning of 24th June. Yet I still worry that we are not out of the woods yet. In fact, with Article 50 not yet triggered and with the new government seemingly stagnant in its efforts to set out a formal plan of action, I fear the worst is yet to come.
The positives of today’s news from the Office for National Statistics (ONS) are that Gross Domestic Product grew by 0.7% in the three months to the end of June and this is higher than original estimations of 0.6%, with business investment driving this improvement. Compared with the Q1 rate of 0.4%, the economy is growing at a much faster rate than we had hoped.
ONS statistician Darren Morgan has said: “Together this fresh data tends to support the view that there has been no sign of an immediate shock to the economy, although the full picture will continue to emerge." And the latter part of this statement is what our government must concentrate on, if our economy is to avoid recession in the longer term. Since Theresa May’s appointment as Prime Minister I have seen no decisive action when it comes to Article 50 and no plans for removing the UK from the EU in the least damaging way possible.
Other countries in Europe are beginning to show signs of impatience, with the Italian prime minister Matteo Renzi telling the BBC this week that the vote was a “bad decision” and that there was no option for British people to have any more rights than others outside of the EU. Also this week, Markus Kerber, head of the German business group the BDI, said that German firms would not support a free trade deal between the EU and Britain, with analysts suggesting we are ever more likely to face a ‘hard Brexit’ when we leave the EU.
In my own line of business, I feel encouraged to see the recruitment sector performing strongly during the months following Brexit. The Association of Professional Staffing Companies reported that vacancy numbers remained stable in August, while the ONS revealed the overall employment rate was 75% in the three months to July 2016. But I cannot help but notice business leaders and their employees showing signs of concern and a drop in confidence regarding the future. While the immediate attitude has very much been one of ‘business as usual’, it surely is only a matter of time before businesses - especially those in the manufacturing and export sectors - are forced to scale back to account for the cost of the weakened Sterling.
What we need now is decisive action from May and her Cabinet to allay concerns and set out a way forward post-Brexit. I eagerly await the Autumn Statement, in which I hope to see bold measures to strengthen the economy on a long-term basis. Our international relations with countries both inside and outside the EU need to be stronger than ever, and I hope Boris Johnson can defy the expectations of many by playing a key role in this. Today’s news is certainly encouraging, but the next quarterly report could be a different story unless brave measures are taken in the short term.