Philip Hammond cautious over Brexit

During the EU referendum campaign, the Remain camp warned that Britain would face a dire economic situation on June the 24th if the result of the referendum was a vote to leave. According to Treasury analysis, there would be an “immediate and profound” economic shock, with growth between 3% and 6% lower, and a “sharp rise in unemployment”. Britain would be in for a year-long recession.

David Cameron warned that a vote to leave would plant “a bomb under our economy”. It was the “self-destruct option”.

Meanwhile, George Osborne claimed that Brexit would leave families £4300 worse off, while house prices would be hit by as much as 18%. A vote to leave would mean a ‘do-it-yourself-recession”.

A hundred days have passed since Britain voted to leave, and surprisingly little has happened since then. We were told that economic growth was slowing as we neared June the 23rd, and that it would collapse following a vote to leave. In fact, economic growth sped up in the three months leading to the referendum.

Recent figures show that UK spending grew strongly post Brexit, confounding predictions that a nervous public would lock their coffers following a vote to leave. UK manufacturing growth is the best it has been ‘in two years’ as the weaker pound has rewarded exporters. Meanwhile, the housing market may have cooled a little, but prices are still rising.

A cautious Chancellor

Despite all the good news Chancellor Philip Hammond made a cautious speech at the Conservative Conference in Birmingham:

“There is no room for complacency. Many businesses which trade with the EU are uncertain about what lies ahead. They have understandable questions about the process of the negotiations; about the deal that will be done; about the changes they will have to make to adapt to the post-Brexit world; and about what it will all mean for their employees, their company, their business model. And I understand their concerns, business, after all, hates uncertainty.”

But he did offer reassurance:

“But let me repeat the pledge of the Prime Minister yesterday: as we negotiate our exit from the EU and our future relationship with it, this government will fight for the best possible deal for British business and British workers; the best possible access to European markets for our manufacturing and servicing industries; and the best possible freedoms for our entrepreneurs and our global exporters, insuring that Britain after Brexit will remain one of the best places in the world for a business to invest, to innovate and to grow.” 

The question is, what will “the best possible” arrangements prove to be?

Empty threats?

The government has declared that it wants to restore Britain’s independence and control over its own affairs, which would suggest that Britain will exit the Single Market.

If it does, the EU could impose tariffs on UK exports and services to the Single Market

Some businesses have warned that they would relocate factories and offices to EU countries if that were to happen. In doing so, they put pressure on the government to remain in the Single Market. However, it’s possible that some of those warnings could prove to be empty threats.

Such things have been known to happen before. In 2002 Nissan said that it would move its Sunderland plant to Europe if Britain didn’t adopt the euro…

The UK has kept the pound, and Nissan continues to make cars in Sunderland.