With the UK economy surprisingly resilient since the Brexit vote, Fathom Consulting examines whether this is pain deferred or pain avoided.
The following commentary and opinion is provided by Fathom Consulting and has used Thomson Reuters economic data for their analysis.
Consumers spend, investment falters
The impact of Brexit has been slight so far.
After the referendum in June, there was a downward spike in economic sentiment but the impact on growth thus far has not really been apparent.
In fact, growth in the six months following the vote has accelerated relative to the preceding six months.
However, Fathom maintains the impact of Brexit is still to come.
Currently, there is no knowing what UK trading relationships will look like until after negotiations have taken place.
This lack of certainty is likely to weigh down on investment.
Fathom believes that weaker business investment will take time to show through, possibly six months or more.
The economic consultancy points out that investment intentions have slowed. Although some way above recession levels, the Bank of England measure has been weaker than its latest reading only 20% of the time.
Flat lining productivity
Fathom’s UK growth predictions were bleak with or without Brexit, due to flat lining productivity.
The economic growth we have seen has largely come from employment, but this cannot continue forever and Fathom predicts productivity growth will remain low when employment growth subsides.
Fathom believes the UK labor market slowdown has already started.
— Lipper Alpha Insight (@Lipper_Alpha) January 26, 2017
So does weak investment, weaker real income growth and weakening labor market point to a weaker outlook for growth in the long term?