Brexit has had no major impact on the economy, says ONS

Office of National Statistics' view contrasts starkly with Bank of England and the OECD, who have both slashed forecasts.

Ben Chapman
Thursday 22 September 2016 11:12 BST
The economy has not yet been affected by Brexit.
The economy has not yet been affected by Brexit. (Reuters)

The Brexit vote has had no major impact on the economy, the Office for National Statistics said on Wednesday.

“The referendum result appears, so far, not to have had a major effect on the UK economy,” ONS chief economist Joe Grice said, whilst warning that worse could be yet to come. “It hasn't fallen at the first fence but longer-term effects remain to be seen,” he said.

The ONS had further good news for Theresa May, revealing that government borrowing for August had fallen to £10.5 billion from £11.5 billion last year.

The ONS's view contrasts with that of the Bank of England, which expects growth in the third quarter of 2016 to halve from its rate in the three months running up to the vote.

The Bank of England reduced its interest rate to an all-time low of 0.25 per cent last month. The move was part of a package of measures designed to boost lending and stimulate the UK economy after the shock of the Brexit vote sent markets into turmoil and led to a number of gloomy economic forecasts.

While manufacturing and construction figures have shown resilience in the aftermath of the Brexit vote, numbers demonstrating the performance of the services sector will not be released until 30 September. Services account for more than three quarters of the UK economy.

An initial post-Brexit estimate of UK GDP will be released on 27 October, but early estimates are notoriously unreliable, often being rounded up or down in future months.

A recent string of positive economic data has led some to say that the early predictions of gloom were overstated.

But analysts have pointed out that the sharp fall in the value of the pound will make imports more expensive once the fixed price contracts have with their overseas suppliers expire. This could in turn mean consumers have less money to spend, potentially harming the economy.

The Organisation for Economic Co-operation and Development today revised its prediction of growth in the UK in 2016 up slightly to 1.8 per cent, but halved its forecasts for 2017 from 2 per cent to 1 per cent.

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