Economists should spend less time trying (and failing) to predict the short term economic effects of Brexit and more time understanding what the referendum says about the underlying structure of the UK economy – my piece for today’s FT comment pages. https://www.ft.com/content/cedeeffc-027f-11e7-aa5b-6bb07f5c8e12
In the FT’s annual new year forecasts, I seem to be one of the only people not forecasting a slowdown in the UK in 2017. Why? Because growth was strong in 2016, productivity is only starting to pick up as the labour market tightens and there’s no evidence of inflation from overheating yet, although of course we may see some from exchange rate depreciation, if that persists. That’s not to say that over the medium-term there wont be negative economic (and other) effects from Brexit, depending on the results of the negotiation. But they will be measured in the medium term, not now.
It’s always a risky thing to point out when one diverges from the crowd, particularly when talking about the future. But I also think you should say it as you see it. So that’s what I’ve done. If I’m proved wrong, for reasons I don’t currently understand, I will say that too.
When politicians talk about the need to raise economic productivity, its often in the context of infrastructure investment and boosting high productivity sectors (finance, engineering, biotech etc). However our low pay sectors are so large that productivity improvements there could not only have macroeconomic consequences but do a lot for other policy objectives such as poverty alleviation. I’m delighted that my recent research report on these issues for the Joseph Rowntree Foundation is picked up in today’s Guardian.
I’ve been keeping a little spreadsheet of official UK public debt forecasts since 2010 (I know, sad life etc….). Here’s the chart that brings it all together and shows that whereas in 2010 debt was expected to peak at 70% of GDP in 2013-14 as the effects of the financial crisis worked their way through, in fact that never happened and it kept on rising.
Yesterday’s data instead shows debt is now expected to peak at a massive 90% in 2017-18. Here’s the picture – each line represents the forecast made at that particular budget or autumn statement.
Pleased that my research report for the Joseph Rowntree Foundation was published today. It’s a round up of a few years of work for various clients around issues relating to low pay, motivation, progression and productivity in the UK retail sector. Here’s the link.
The pound’s fall is merely the crowd-sourced view of Britain’s perceived economic prospects. If Brexit comes to be seen as good for Britain it would reverse. Some thoughts on the plight of sterling and what British consumers have in common with Donald Rumsfeld, written for Portland’s Brexit unit, here.