Brexit uncertainty has begun driving up job losses across Britain as political turmoil holds back the economy, according to a Guardian analysis of economic news over the past month.
In a sign of the mounting stress on the UK, the number of people in work dropped by the largest margin in four years in August as companies put their hiring plans on hold, with firms losing contracts and facing delays because of the uncertainty over Britain’s future. , some bright patches remain, including official figures suggesting that a summer recession has been avoided.
As parliament attempts to scrutinise Boris Johnson’s Brexit plan, the government has come under heavy fire for refusing to publish a detailed economic impact assessment of its proposals.
Writing in the Guardian, David Blanchflower, a former member of the Bank of England’s monetary policy committee (MPC), said it was “disgraceful” that the government had so far refused to publish any details.
“This is either utter incompetence or they are trying to hide bad news or both. Brexit of whatever form is going to lower living standards compared to remaining in the EU,” he said.
The analysis released last year as Theresa May attempted to win support for her Brexit deal indicated that a plan similar to Johnson’s would sacrifice as much as £130bn in lost GDP growth over the next 15 years. Sajid Javid has rebuffed the criticisms, saying it is “self-evidently in our economic interest” to ratify Johnson’s Brexit plan.
Mark Carney, the Bank of England governor, has said a Brexit deal would benefit the economy by removing the cloud of uncertainty hanging over British businesses. But with key details for the country’s future relationship with the EU yet to be confirmed, MPs warn that more time is required to avoid lasting economic damage.
To gauge the impact of Brexit monthly, the Guardian monitors eight economic indicators, along with the value of the pound and the performance of the FTSE 100.
City economists made forecasts for seven of those barometers before their release and in three cases the outcome was worse than expected. Three beat the forecasts, one met the forecast.
Amid signs of a breakthrough in the Brexit talks emerging over the past month, the pound has surged to the highest level since May on rising hopes in the City of London that a disruptive no-deal Brexit can be avoided, while shares in UK-focused companies have rallied.
Surveys of business activity monitored by the Treasury and the Bank of England for early economic warning signs indicated that private sector activity slid into contraction in September, as British firms put their spending plans on hold amid the uncertainty.
According to IHS Markit and the Chartered Institute of Procurement and Supply (Cips), activity in the country’s dominant services sector – which makes up about 80% of the economy, encompassing industries from banking to restaurants – fell into negative territory as companies reported job cuts, falling sales and cancelled and postponed projects.
The latest official figures from the labour market revealed a 56,000 drop in employment in the three months to the end of August from the previous quarter – the biggest fall in four years – as high street retailers and manufacturing firms cut jobs across the country.
Despite the mounting gloom, official figures suggested that a recession between April and September was likely avoided. Gross domestic product (GDP) rose by 0.3% in the three months to the end of August, boosted by rising service sector activity. According to the ONS, the economy would need to shrink in September by more than 1.5% to confirm a recession – a level it said would mark an extreme and rare decline.
Against a backdrop of slower global growth amid the US-China trade war and as lingering Brexit uncertainty drags down export activity in the UK, analysts warn the British economy remains vulnerable to shocks.
Writing in the Guardian, Andrew Sentance, a former member of the MPC, warned that economic growth was becoming increasingly unbalanced, as Brexit uncertainty harms the manufacturing sector.
“The UK economy is likely to continue to grow at a modest pace, driven by consumer spending and the services sector. But manufacturing industries will continue to struggle – not least because it is the part of the economy most exposed to the negative aspects of Brexit,” he said.
Source: The Guardian UK