Is the decision of the United Kingdom to leave the European Union (Brexit) to blame for the UKs recent economic woes? – in short, yes.
The UK’s GDP fell by 0.2% between April and July 2019, which according to the Office for National Statistics is the worst performance since 2012 where the GDP also shrank by 0.2% in one of the quarters. If you want to find a time in recent history in which the British economy performed worse than this, you would have to look back to the great recession in 2008.
Sajid claims that the reason GDP shrank between Q1 (Quarter One) of 2019 and Q2 of 2019 is because businesses spent a significant sum of money in the lead up to the original Brexit date on stockpiling goods and materials in order to mitigate the aftershock of a no deal Brexit. This resulted in the GDP for Q1 being higher than projected. As businesses have not needed to buy goods and materials (and instead began unwinding their stockpiles) in Q2, spending by businesses has been down and as a result the GDP shrunk.
Sajid Javid (UKs Chancellor of the Exchequer), speaking to Channel 5 economic correspondent Helia Embrahimi, made it clear that he isn’t convinced that Brexit itself is to blame and instead is blaming the uncertainty around Brexit. The Confederation of British Industry said business sentiment is “dire” because of uncertainty over Brexit and slower global economic growth.
Despite Javid’s claim that he doesn’t ‘think anyone will be surprised by todays result’, experts have made it clear that they expected growth to be flat in Q2.
Sajid also optimistically dismissed fears of a technical recession (where the GDP shrinks two or more consecutive quarters of the year), boasting of the lowest unemployment rate in 44 years and national debt falling (which will not last long unless Boris backtracks on his spending and tax cut promises) however it is believed that Sajid is failing to see the bigger picture.
While it is commonly accepted amongst economists that a no deal Brexit will result in the British economy to car crash and will set back Europe substantially, when looked at the perspective of a larger global economic crisis, it is clear the UK will be trapped in a perfect storm. With the British currency hitting a low of £1.22 to USD close of business on Friday the 16th of August (compared to a pre brexit level of around £1.45 to every US Dollar), it is clear that the economy is a far cry from where it could be had Brexit not occurred.
The United States is now locked in a trade war with China and the Dow Jones is plummeting 800 points and displaying the yield-curve inversion in the Bond Market (which is has been an early indicator for the last seven recessions), by the time Brexit comes around, no deal or not, it may just be the straw that broke the camel’s back.