UpdateCan UK’s post-Brexit strong performance continue?
Britons beat doomsayers with positive economic data after the vote, thanks to consumer confidence and falling pound
The British economy has performed far better than expected following the country’s vote to leave the European Union, thanks to consumer confidence, a falling pound and immediate policy action. Yet in the face of continued uncertainty about what Brexit might mean, it remains unclear how sustainable this performance will be, with implications for the rest of the world, not to mention Hong Kong.
In August, the Bank of England’s Monetary Policy Committee predicted the British economy would grow 0.8 per cent in 2017. On Thursday, it upgraded that forecast to 1.4 per cent, saying “indicators regarding the near-term outlook for growth had been stronger than expected”.
It would have been hard for the central bank not to modify its forecast. Just before the announcement, Britain’s services purchasing managers’ index came in at 54.5 per cent, two points above consensus expectations and the previous month’s reading, following a third quarter in which an HSBC report described the sector as “being in rude health”.
The services sector accounts for about 80 per cent of the British economy.
“The British economy has not evolved as expected after the referendum on EU membership. What did the Monetary Policy Committee get wrong?” asked a Standard Chartered report published after the Bank of England’s announcement.
When Britain voted to leave the EU in June, most analysts predicted its economy would suffer. Ratings agencies Fitch and Standard & Poor’s downgraded the country after the vote while Moody’s Investors Service gave its rating a negative outlook.