The British economy “will turn nasty” and could fall into recession as a result of Brexit, former Business Secretary Sir Vince Cable has said.
Recent economic growth and reassurances over sterling value may have led Britain into a false sense of calm, but living standards are being cut and longer-term problems are imminent, he warned.
“The two ways that economics are going to turn nasty are because devaluation – which may well grow - cuts peoples incomes,” he told The Independent. “They’re paying more for their food and their petrol, and that’s going to hit people next year particularly.
“The second is that businesses have just stopped investing, and that feeds through into potential recession and stores up long-term problems.
“Part of the problem is that George Osborne went round with this ‘Armageddon’ that the world was going to collapse and it hasn’t. So people think there’s no problem but there is.”
Speaking ahead of his return to the further education sector, the former Business, Innovation and Skills Secretary called for a review of government spending in education in particular.
Working with the National Union of Students, he will lead a new research project, Students Shaping Further Education, into how major reforms to the sector will affect current and future students across the UK.
What experts have said about Brexit
What experts have said about Brexit
1/11 Chancellor of the Exchequer Philip Hammond
The Chancellor claims London can still be a world financial hub despite Brexit “One of Britain’s great strengths is the ability to offer and aggregate all of the services the global financial services industry needs” “This has not changed as a result of the EU referendum and I will do everything I can to ensure the City of London retains its position as the world’s leading international financial centre.”
2/11 Yanis Varoufakis
Greece's former finance minister compared the UK relations with the EU bloc with a well-known song by the Eagles: “You can check out any time you like, as the Hotel California song says, but you can't really leave. The proof is Theresa May has not even dared to trigger Article 50. It's like Harrison Ford going into Indiana Jones' castle and the path behind him fragmenting. You can get in, but getting out is not at all clear”
3/11 Michael O’Leary
Ryanair boss says UK will be ‘screwed’ by EU in Brexit trade deals: “I have no faith in the politicians in London going on about how ‘the world will want to trade with us’. The world will want to screw you – that's what happens in trade talks,” he said. “They have no interest in giving the UK a deal on trade”
4/11 Tim Martin
JD Wetherspoon's chairman has said claims that the UK would see serious economic consequences from a Brexit vote were "lurid" and wrong: “We were told it would be Armageddon from the OECD, from the IMF, David Cameron, the chancellor and President Obama who were predicting locusts in the fields and tidal waves in the North Sea"
5/11 Mark Carney
Governor of Bank of England is 'serene' about Bank of England's Brexit stance: “I am absolutely serene about the … judgments made both by the MPC and the FPC”
6/11 Christine Lagarde
IMF chief urges quick Brexit to reduce economic uncertainty: “We want to see clarity sooner rather than later because we think that a lack of clarity feeds uncertainty, which itself undermines investment appetites and decision making”
7/11 Inga Beale
Lloyd’s chief executive says Brexit is a major issue: "Clearly the UK's referendum on its EU membership is a major issue for us to deal with and we are now focusing our attention on having in place the plans that will ensure Lloyd's continues trading across Europe”
8/11 Colm Kelleher
President of US bank Morgan Stanley says City of London ‘will suffer’ as result of the EU referendum: “I do believe, and I said prior to the referendum, that the City of London will suffer as result of Brexit. The issue is how much”
9/11 Richard Branson
Virgin founder believes we've lost a THIRD of our value because of Brexit and cancelled a deal worth 3,000 jobs: We're not any worse than anybody else, but I suspect we've lost a third of our value which is dreadful for people in the workplace.' He continued: "We were about to do a very big deal, we cancelled that deal, that would have involved 3,000 jobs, and that’s happening all over the country"
10/11 Barack Obama
US President believes Britain was wrong to vote to leave the EU: "It is absolutely true that I believed pre-Brexit vote and continue to believe post-Brexit vote that the world benefited enormously from the United Kingdom's participation in the EU. We are fully supportive of a process that is as little disruptive as possible so that people around the world can continue to benefit from economic growth"
11/11 Kristin Forbes
American economist and an external member of the Monetary Policy Committee of the Bank of England argues that the economy had been “less stormy than many expected” following the shock referendum result: “For now…the economy is experiencing some chop, but no tsunami. The adverse winds could quickly pick up – and merit a stronger policy response. But recently they have shifted to a more favourable direction”
The review will consider all aspects of the industry, including funding cuts to apprenticeships – which he says could ultimately affect productivity and add a further blow the economy.
“One of the problems with Brexit is that it’s sucking the energy out of the Government,” he said. “The really big thing about the UK is productivity if we take our eyes off that that’s bad.”
“It is a little bit like the Peanuts cartoon, where he walks off the cliff but is still peddling furiously, and hasn’t actually dropped. The economy is a little bit like that at the moment.”
“The economy looks alright in sterling terms but if you translate it into dollar terms, it is a lot smaller than it was and people are not aware of that, and people are going to feel it in the next few years.”
In the years before the global economic crisis, Sir Vince warned openly of the dangerous market banks were creating with easy lending and challenged the then-Chancellor, Gordon Brown, on his policies.
In November 2003, he said: “Is not the brutal truth that the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?”
Experts this week warned that sterling is likely to plunge to a new record low once procedures to leave the EU begin.
Sterling has already dropped by nearly 20 per cent against the dollar since the Brexit vote, becoming the world’s worst-performing currency in October.Reuse content