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Is Brexit pain still to hit UK economy?

Brexit. Large waves hit the lighthouse and harbour at high tide at Newhaven in Sussex, southern England February 15, 2014. Britain was hit by the third storm in a week causing localised damage and compounding the record levels of flood water in the south and west of the country. REUTERS/Toby Melville (BRITAIN - Tags: ENVIRONMENT) - RTX18VKZ
Photographer: Toby Melville

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.

A new way of tracking the UK’s Brexit fortunes

In their Global Economic and Markets Outlook, our partner Fathom Consulting present their view on how the Brexit vote will affect the UK economy going forward.

Find out more with powerful financial analysis on Thomson Reuters Eikon

UK growth has so far exceeded all expectations, but this doesn’t necessarily mean that warnings about the impact of Brexit were misguided.

Read Fathom’s global economic & markets outlook full report

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.

Brexit Graph Business investment response to positive shock

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.

Brexit graph UK investment intentions

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Flat lining productivity

Fathom’s UK growth predictions were bleak with or without Brexit, due to flat lining productivity.

Brexit graph

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.

Read Fathom’s global economic & markets outlook full report

Brexit graph
Brexit UK GDP graph

Fathom believes the UK labor market slowdown has already started.

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So does weak investment, weaker real income growth and weakening labor market point to a weaker outlook for growth in the long term?

Brexit Article 50
Click image to find answers on Thomson Reuters Brexit hub

To continue your analysis and see real-time updated charts from Fathom, go to Chartbook in Thomson Reuters Eikon Asset Management or find out more about Thomson Reuters Datastream.

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