As 2016 Came to an end, the Immediate Fallout From the Brexit Referendum had not had as big an Impact on the UK as Some had Initially Feared
UK Economic Outlook
Despite the elevated levels of uncertainty caused by the June 2016 Brexit vote, the British economy finished the year reasonably strongly. In the manufacturing sector, the December Purchasing Managers' Index (PMI, compiled by Markit) rose to its highest level in 30 months, at 56.1 points, far above the neutral 50-point line that divides expansion in sectoral activity from contraction. The picture was equally bright in the service sector, with the PMI rising to 56.2 as new order inflows expanded rapidly.
Nonetheless, the outlook is becoming gloomier as the weak pound (which has fallen considerably against the dollar, the euro and other major currencies since the referendum) is pushing up inflation. The input price inflation sub-index in the service sector PMI reached a 68-month high in December, while consumer price inflation came in at 1.1% in November - the highest value in more than two years. We predict that living standards will be hit in 2017, with inflation reaching 2.6% for the year as a whole (and therefore likely to outpace wage growth). In terms of real GDP expansion, Dun & Bradstreet forecasts the economy to grow by just 1.0% in 2017 (and 1.1% in 2018), only half the rate we estimated for 2016. Import demand in particular will suffer, with the weakness of the pound likely to last until a Brexit settlement with the EU is in place.
UK CFOs Pessimistic about Brexit: Dun & Bradstreet Survey
As 2016 comes to an end, the immediate fallout from the Brexit referendum has not had as big an impact on the UK as some had initially feared. In fact, the UK is widely expected to finish 2016 as the fastest-growing G7 economy. However, Dun & Bradstreet expects Brexit’s impact on the UK economy to be much stronger in the future. This sentiment is backed by a Brexit survey we commissioned in November 2016.