‘But, Secretary of State, Britain is the slowest-growing economy in the G7,” declared one of this country’s most experienced broadcasters, in the midst of a radio interview about the Government’s preparations for a “no-deal” Brexit.
It is often said that, since the vote to leave the European Union in June 2016, the UK has been at the bottom of the growth league among the world’s most advanced economies. This assertion is made with particular frequency, of course, by those determined to reverse that historic referendum result.
Yet it’s not true. UK GDP expanded by 1.8pc in 2016, placing us ahead of the US, France and Canada, among others. Last year, our growth was 1.7pc – still better than Japan and Italy, both in the G7 the last time I checked.
UK GDP growth will be around 1.5pc in 2018, on official estimates, amid a broader slowdown across the whole EU – but, again, that would still put us well ahead of Italy and Japan, far from “the slowest growing G7 economy”. And there’s an important proviso.
While the Bank of England stopped quantitative easing some time ago, growth in both these nations remains propped up by “extraordinary monetary measures”. The European Central Bank (which covers Italy, of course) and the Bank of Japan continue to pump out the equivalent of tens of billions of dollars of “funny money” each month. Yet, growth in Italy and Japan will still struggle to reach 1pc in 2018, way behind the UK.
Britain’s precise position in the G7 growth league is, of course, somewhat less important than the absolute level at which the economy is performing – for that is what reflects the reality of most people’s lives. It strikes me, though, that the widely repeated assertion we’re behind everyone else is indicative of a broader doom-mongering tendency – which, again, is partly driven by those unable to accept the referendum outcome.
The truth is that the British economy has shown, and continues to show, a good deal of economic resilience. Growth remains fragile, most definitely subject to Brexit-related uncertainties, and still below its long-term trend rate. But, to the seeming dismay of some forecasters, GDP continues to expand at a respectable clip.
The UK grew by 0.6pc during the three months to July, according to new figures from the Office for National Statistics, the fastest rate since August 2017. This marks a considerable pickup from 0.4pc growth during the three months to June.
The 0.6pc expansion of the UK services sector, accounting for four fifths of our economy, was fuelled in part by brisk retail and wholesale trade, helped in turn by the hot summer. But the professional services sector was also very buoyant, up no less than 4.4pc over the same period.
Construction, too, benefited from the summer heat, growing 3.3pc over the three months to the end of July. And while industrial output is slowing, the UK’s PMI Manufacturing Index still registered 52.8 in August, with readings above 50 indicating growth – its 25th successive month of expansion since June 2016.
We’ve also just learnt last week that the UK trade deficit narrowed by £1.4bn to £3.4bn during the three months to July – and, for once, this improvement derived principally from rising exports rather than falling imports. Unemployment also fell on latest numbers, once again, dropping by 55,000 to 1.36m. The jobless rate remained at 4pc, a 42-year low.
With wages up by 2.9pc between May and July on official data, outstripping inflation for the fourth successive month, living standards are now rising in real terms. There is, as some ministers have begun to say, “light at the end of the tunnel”.
While the German Bundesbank and the Bank of France just cut their growth forecasts for 2018 as a whole, the Bank of England, in contrast, just confirmed the UK’s immediate growth outlook is improving.
The Bank last week raised its third-quarter growth projection to 0.5pc – which would see Britain growing faster than France and Germany. And, again, in contrast to the ECB, the Bank has already begun raising interest rates, without the eurozone’s ongoing QE dependence.
The Bank’s Monetary Policy Committee raised rates in August, for only the second time in a decade, to 0.75pc. Last week, despite stronger growth and wage data, the MPC voted unanimously to keep them on hold. Most investors think rates will stay put until mid-2019 at least. Given deepening concerns about an emerging markets meltdown, and Brexit uncertainties, I agree.
Last week’s raft of relatively strong UK data drove few headlines, though, as political noise once again drowned out the economic facts on the ground. Mark Carney was accused, I’d say unfairly in this case, of spreading “gloom and despondency” – after he linked a 35pc house price crash with a “no-deal Brexit”.
The Bank Governor was, in fact, briefing the Cabinet about a “worst case scenario”, a highly improbable outcome. In their eagerness to brief the press, anti-Brexit cabinet ministers seemingly overlooked that nuance.
Each day, though, the constant drumbeat of woe surrounding a “no-deal” Brexit gets louder. Such negativity is misplaced. I’m relatively relaxed about the prospect of trading with the EU under World Trade Organisation rules – as regular readers will know.
Why? Because that’s the basis on which most trade is conducted globally. The UK trades under WTO rules with the US (our biggest single country trading partner), China and nations making up most of the 80pc-plus of the world economy lying beyond the EU’s shores – a fact you rarely hear on the radio, but no less true for that.
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