The UK Economic Outlook
The government has managed to push the EU Withdrawal Bill through parliament in June. The bill will repeal the European Communities Act from 1972 and provides the legal base for Brexit. Although the adoption of the Withdrawal Bill creates more clarity about the Brexit roadmap, it remains unclear what the EU-UK trade and investment relationship will look like after Brexit.
Dun & Bradstreet expects some progress towards the EU summit in October, as this is the final opportunity for a deal, given that any agreement will have to be voted on by the British and the European Parliament before the UK leaves the EU on 29 March 2019.
The Global Outlook
Trade war threats are adding uncertainty. The ‘America First’ policy has set in train a cycle of tit-for-tat tariff measures, not just between the US and China but also other countries and blocs such as the EU and the US. These are threatening global trade flows and the uncertainty caused by the raising of the barriers is affecting global financial markets, encouraging a flight to safe havens. As a result, the US dollar has strengthened, and vulnerable emerging currencies have come under pressure. However, other emerging economies, particularly in the Far East and Southeast Asia, are proving more resilient.
Meanwhile, we are concerned about the levels of debt as a percentage of GDP – household, non-financial corporate and government – at a time when interest rates are rising or are set to rise. Household debt is now 33% higher than at end-2007 (before the global financial crisis), while non-financial corporate debt is over 40% higher in the same period and government debt over 100% higher. Furthermore, depreciating currencies will add to the servicing costs of foreign debts.