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Brexit has had ‘no major effect’ on economy so far

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There has been little impact of the Brexit vote on the UK economy so far, says the Office for National Statistics (ONS).

“The referendum result appears, so far, not to have had a major effect,” its chief economist Joe Grice said.

Official figures have not yet reflected the collapse in confidence predicted by some surveys since the referendum.

But the ONS warned that we have not yet had official figures for the service sector, which are due next week.

The services sector accounts for more than three-quarters of the economy – the index of services for July – and is out on 30 September.

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‘Dramatic deterioration’

The first estimate of how the whole economy fared in the three months after the referendum will be released on 27 October.

There were stark warnings during the referendum campaign of the short-term effects of a vote to leave the European Union.

And in July, these appeared to be borne out when the results of a closely-watched economic survey indicated a “dramatic deterioration” in activity.

IHS Markit’s survey suggested both the manufacturing and service sectors had suffered a decline in output and orders.

However, subsequent surveys from the same body have indicated that activity in the manufacturing and service sectors has bounced back.

UK construction workers
Image captionUK construction activity has followed similar trends to previous months, the ONS says

The effects of the Brexit vote have not yet appeared in official figures.

The manufacturing and construction sectors have followed much the same trends as they had in previous months, while the ONS said the rise in inflation could be largely accounted for by last year’s declines coming out of the annual figures. Employment figures for the three months to the end of July remained strong.

Retail sales fell 0.2% in August, but had grown 1.9% in July. “So far there are no signs of a sharp collapse in consumer confidence as some early fears had suggested,” the ONS said.

‘Uncertainty’

But Mr Grice stressed that the figures seen so far were short-term indicators. “It hasn’t fallen at the first fence but longer-term effects remain to be seen,” he said.

He was backed up by the Organisation for Economic Co-operation and Development which, while revising its prediction of growth in the UK in 2016 up slightly to 1.8%, also halved its forecasts for 2017 from 2% to 1%.

Chancellor Philip Hammond responded to the forecast by saying: “The OECD highlights uncertainty in their outlook and, while I recognise that there may be difficult times ahead, I am confident that we have the tools necessary to support the economy.”

The Bank of England’s agents’ summary of business conditions covering the period from May to August this year was encouraging.

“The annual rate of activity growth had slowed overall as uncertainty rose following the EU referendum, although it remained positive,” it said.

“However, business sentiment improved slightly in August following a marked dip in the immediate aftermath of the referendum.”

 

bbc.co.uk, 21st September 2016

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