For all the resilience the UK economy has shown, there is no doubt that this year's ISA season is set against a backdrop of uncertainty. Whatever the pros and cons, Brexit, and a lack of clarity on what our future economic relationship with the EU will look like, has left us at a crossroads.
The Brexit economy – two months later
Depending which newspaper you're inclined to read, the fallout from the Brexit vote on 23 June has been packaged and interpreted in a variety of ways. Yet, poorly-disguised agendas aside, there is a lot to digest from what has occurred over the past two months - both positive and negative.
Notwithstanding the fact that it is far too early to be making any steadfast predictions about what the future holds, with two months having now elapsed since the historic EU referendum vote, we thought it a good time to take stock of where things are at in terms of the different facets and sectors of the UK's economy. So, in the interests of neutrality, we've decided to list five things to make you feel cheery, and five to feel wary.
On the plus side...
- Borrowing is getting even cheaper: For those in the market for secured and unsecured credit, not to mention homeowners with variable rate mortgages, the post-Brexit cut in Bank of England rates will likely help to make your loans even more affordable for the foreseeable future. Added to that, the concurrent cash injection into the economy should keep to things moving for now.
- The stock market's holding its own: The stock market is a sensitive beast, with the only constant being the variables in performance across the spectrum. But few would have expected the major indicators such as the FTSE 100 and FTSE 250 to fare as well as they have since 23 June.
- We're still growing: Survey data last week showed that UK consumer spending actually increased for the month of July. Consumer confidence is one of the most powerful lines of defence against a recession, and all signs are that this has not been dented. But steady growth has also been recorded in both the manufacturing sector and building industry, suggesting a slowdown therein is not exactly imminent either.
- Property holds steady: Initial fears of a sudden slump in the property market have yet to materialise on a wide scale. Estate agents here and there have reported declines in prices and sales, but the latest report from HM Revenue & Customs confirmed that sales of houses in July showed no significant signs of drop-off compared to June, suggesting that there is little panic among buyers at this stage.
- The British powerhouse: It isn't about nationalism; mere observation of fact. A country with 65 million consumers - many of whom would be considered affluent by global standards - is unlikely to suddenly dip into severe recession at the drop of a hat. Added to this, signs are positive that even if full access to the EU single market were to be terminated, other major countries are ready and willing to do business.
And now for the down side...
- The decline of the pound: Exporters will be smiling about it, but the fall in value of the pound to a 31-year low will have a noticeable impact on most consumers. Aside from increased costs of travel, an import-heavy island like Britain will likely see prices of consumer goods rise as a result, and inflation data suggests this is already happening.
- Saving misery: Lower interest rates are great news for borrowers. But for savers and pensioners, who've endured nearly a decade of scandalously low returns on their money, the picture is becoming all the more grisly, and the spectre of negative interest rates will cause even more chills down the spine.
- That pesky deficit: George Osborne departed the Chancellor of the Exchequer’s office with few adoring fans. But while replacement Philip Hammond's expected confirmation that his predecessor’s plans for running a budget surplus by 2020 will be scrapped is a necessary step, it does mean that the already frightening national deficit looks set to balloon further over the coming years.
- The fear of the unknown: Uncertainty is the enemy of any economy, and right now, Britain has it in abundance. When Will Article 50 be triggered? What access will we have to the single market? Can we negotiate a deal within two years? What will life outside the EU look like? How long will it take to secure trade deals elsewhere? Will big banks and big business head to pastures new? In short, we just don't know.
- The worst could be yet to come: Many people fail to consider that Britain hasn't actually left the EU yet. But, already, there have been seismic impacts on the UK economy across the spectrum. And with the world's economy in a fragile state, the possibility that such shocks could be amplified when the divorce with the EU actually occurs in earnest is difficult to dismiss.
Take from the above what you will – the glass could be either half full or half empty. Undeniably, these are fascinating and unpredictable times, and Brexit represents one of the biggest economic shakeups in the modern era. The reality of economics is that most stimuli have both positive and negative ramifications, and what’s good for one sector can be catastrophic for another. Let's hope that, with the fallout from the referendum still very much in its infancy, the impact of Brexit delivers more of the former, and less of the latter to the UK economy in the years to come.
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- Our lenders show faith in P2P lending after Brexit vote
- Looking after your pension pot post-Brexit
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