Britain’s Brexit will be slow and painful – assuming that it ever happens:
Alex White of the Economic Intelligence Unit posted the EIU’s thoughts on the impact of Brexit in 24 points on twitter.
The great thing about twitter is that it does encourage brevity!
1. Brexit has plunged the UK into political, economic and market turmoil. We expect this turmoil to be sustained
2. Financial market volatility will persist, while uncertainty over the future of the UK’s relationship with EU will feed into real economy
3. We significantly revised our economic fcast. After growth of 1.5% this year, we expect contraction of 1% in 2017 pic.twitter.com/MuaeHpav6m
4. We expect to see decline in investment of 8% and decline in private consumption of 3% in 2017 with the pound levelling out at $1.24
5. The vote has transformed our fiscal forecasts. Falling tax rev & higher social transfers as unemployment rises pic.twitter.com/DEg0Qu9gpq
6. We now expect the UK’s public debt burden to reach 100% of GDP by 2018 pic.twitter.com/Qj3cjsHAcj
7. This hit brings UK’s post-crisis recovery to a halt. 2018 real GDP will be almost 4% below pre-referendum forecast (2020 = 6% below)
8. While this is going on, politics will remain deeply fractious. The Govt, the main parties, parliament & the Union all face big threats
9. We expect two months of chaos in the near-term. New PM Johnson (or May) will be in post in Sept, and start to figure out way ahead
10. The UK will likely invoke Art 50 before year end, implying that negotiations will conclude in late 2018
11. UK will agree an EEA minus deal with significant constraints on services access in return for limitations on migration
12. Much of the financial services sector may be left in the cold
13. New PM will eat heroic quantities of humble pie to get the deal; UK will be permanently out of the room on big decisions
14: This new deal will be confirmed through either a second referendum or a general election at the end of the process
15. Leavers will tell voters they wont get what they want on migration. Will lead to major backlash = structural rise for radical right
16. This is a particular threat for Labour. We expect UKIP etc to mount a serious challenge in Labour heartlands (even with Corbyn gone)
17. UK establishment will take time to fully reassert itself. Lack of planning / credibility will lead to ongoing doubts about capacity
18. Much of the UK’s ‘political stability premium’ based on predictability / reliability etc could be lost for long time
19. As UK leaves, recovery will be underway but economy & politics will look structurally different
20. We are not predicting second Scot ref at this stage, but constitutional settlement needs to change (inc London / FPTP?)
21. Impacts across Europe will be substantial. We have taken 0.2% off growth and see larger political risks – particularly in Italy/France
22. The region is capable of managing Brexit, and other crises in isolation. It may not be capable of managing several crises at once
23. We expect things to hold together, but see major downside risks – include possibility EU wont deal, or that crises spin out of control
24. Follow @TheEIU_Europe, @DHaralambous and @aenguscollins for more