Since the UK voted to leave the EU five months ago, the economy has held up much better than expected, probably owing to the healthy household fundamentals heading into the vote. As we have argued before, it is the long-run risks that need to be watched closely. Through less trade, investment and migration with its biggest market, the EU, Brexit represents a long-term supply-side shock for the UK. On the political side, the apparent lack of progress on a Brexit strategy and the unforeseen hurdles before triggering Article 50 are concerning. They reflect a complacency and lack of planning by the government before the referendum and do not bode well heading into the Brexit-negotiations with an increasingly frustrated EU-27. The stark difference between how the currency market has reacted compared to UK households reflects this economic and political divergence since the vote – see Chart 1.
In this update, we cover the three key themes for the coming months: (1) the economic outlook, (2) the Supreme Court hearing on Article 50, and (3) what to expect in terms of infrastructure spending at the 23 November Autumn Statement.Als PDF downloaden