Economy

The rearguard Remain campaign is now living in a parallel universe. In the past 24 hours we have heard endless whining about Sir Ivan Rogers’ departure and how it will mean disaster for our trading relationship with the EU. We’ve had more claims that inflation is going to surge. The poor Christmas results put out by Next have been taken as a sign of a post-Brexit economic slump when they are really just part of a change in the patterns of retailing, with online sales growing at the expense of those in shops. Meanwhile, come yet more genuine good news on the economy. Yesterday, the Markit/CIPS Purchasing Managers’ Index (PMI) for the manufacturing sector was published, showing a rise to 56.1 in December, from 53.6 in November.

At the Westfield shopping centre in east London, the queues started at 2 a.m. on Christmas night. In Wrexham, people started lining up at three, getting ready for a six o’clock start. In Edinburgh, hardy shoppers braved flurries of morning snow to make sure they were first in line for Boxing Day bargains. Whatever else is happening at the close of this year, British shoppers are as indefatigable as ever in their determination to keep spending. Surely it wasn’t meant to be like this? In the wake of the vote to leave the EU back in June, mainstream economists were unanimous in their view that we would be in a recession by now.

At the Westfield shopping centre in east London, the queues started at 2 a.m. on Christmas night. In Wrexham, people started lining up at three, getting ready for a six o’clock start. In Edinburgh, hardy shoppers braved flurries of morning snow to make sure they were first in line for Boxing Day bargains. Whatever else is happening at the close of this year, British shoppers are as indefatigable as ever in their determination to keep spending. Surely it wasn’t meant to be like this? In the wake of the vote to leave the EU back in June, mainstream economists were unanimous in their view that we would be in a recession by now.

Trying to write the first draft of history on the EU referendum and the leader-ship mess that followed had both its dramatic and its comic elements. My phone never stopped ringing with Eurosceptics keen to tell me why their contribution to a meeting that had previously escaped my notice was the decisive factor in securing victory. But when a vote is so close — 52 per cent to 48 per cent — then it would not have taken much to push the result the other way. Donald Trump’s victory adds some credence to the idea that Brexit was pre–ordained, part of a wave of history. But the campaign turned on several events that were the result of accident, farce or both. If a relatively small number of those who backed Brexit had voted the other way, Remain would have triumphed.

From the moment she arrived in 10 Downing Street, Theresa May has been commendably clear about her economic priorities for Britain. She wants the country to be a beacon of free trade, at a time when protectionism is on the rise the world over. She is annoyed at the way in which quantitative easing has manipulated asset prices, making property unaffordable. And while David Cameron was very successful in raising the incomes of those at the bottom, she is concerned that those in the middle have not fared as well. She wants a ‘country that works for everyone’ — that is to say, one where effort is always rewarded. This is, alas, no cliché.

Philip Hammond started his autumn statement to the House of Commons by saying his style would be rather different to George Osborne’s. Yet the Chancellor still had a rabbit to pull out of his hat at the end -- albeit one designed to show he wasn’t a political meddler like previous holders of his job by saying there would no longer be two economic statements involving changes to fiscal policy ‘for the sake of it’ -- and even continued Osborne’s practice of announcing money to restore a historic building.

The City and Westminster are waiting to see what Philip Hammond does in the autumn statement next month. I write in The Sun this morning, that they are looking to see what the new Chancellor’s strategy is for guiding the economy through the uncertainty that will exist until we know what the Brexit deal is. In a private meeting with Tory MPs this week, Hammond gave some indications as to what he plans to do on November 23rd. He was clear that it won’t be a give-away statement. He warned that the deficit remains ‘eye wateringly large’, that the debt to GDP ratio is getting close to the level at which the markets start to get concerned and that there needed to be a discipline on departmental spending to reassure the markets.

After the Brexit vote, the Financial Times summed up the general mood in the City by running a weekly doomometer, which was expected to chart the impending economic collapse in real time. But after a brief wobble, the economy got back to normal fairly quickly. Soon, the weekly data started to rather contradict the mood of panic – which baffled the various experts, many of whom had by then forecast an immediate recession. Pieces of good economic news were dismissed as deceptive snapshots. And when Q2 GDP came in looking very strong – 0.6 per cent (it was revised up to 0.7 per cent today) – that was dismissed as containing just a few weeks of post-referendum data. The real story, it was said, will come when the Q3 data arrives for July, August and September.

Government insiders expect Nissan to announce that it is building the new Qashqai in Sunderland in the next week or so. As I write in The Sun today, the Business Secretary Greg Clark has been in Japan to see Nissan high-ups and the government is now optimistic the deal will be done. This news will be a major relief for the government. It shows that the British car industry isn’t being written off by Brexit and given how some in Brussels seem to think that bad economic news will send this country scurrying back to the EU, will strengthen the UK’s negotiating hand. One can also just imagine how Brexit’s critics would have reacted if Nissan had announced it was moving production away from Sunderland, which voted heavily to leave, to an EU-27 location.

Philip Hammond's speech has had a mixed reaction from his MP colleagues, it is fair to say. A number have run up to me and rolled their eyes at how terrible his jokes were, or at his skill in managing to make one of the most important jobs in government sound boring, even telling delegates at one point not to switch off before talking about the very interesting productivity puzzle. One minister mutters that the speech was 'classic Hammond', which was more of a reference to his lack of charisma than his rather downbeat assessment of everything, from how interesting his job is to the consequences of Brexit. It was indeed striking that his assessment of the consequences of Brexit was quite so different to the rather glib picture painted by Boris Johnson yesterday.

The Brexit bounce continues. HM Treasury has today released forecasts of the economists it follows, as it does every month. Last time, there was a flurry of downgrades and forecasts of an immediate recession. Now, these forecasts are being torn up by everyone, including by the FT (although you can bet the FT won't report on the upgrades as eagerly as it did the downgrades). The average new forecast suggests GDP will grow by 1.8 per cent this year, far better than the 1.5 per cent forecast last month. This back to where the consensus was before the Brexit vote. The OECD, which had previously predicted "immediate" uncertainty after a Brexit vote, has today also upgraded to 1.8pc for this year, saying instead that the pain will be felt next year (it predicts 0.9pc growth).

The circus of Spanish politics shows no signs of stopping. For now, the country is managing to weather this eight month-long deadlock surprisingly well: Spain’s GDP growth has continued at one of the fastest rates in the eurozone. But this is in spite, rather than because, of Spain's zombie government. A record-breaking tourist season has helped, as has a jump in consumer spending. Yet finally, the cracks are beginning to show; and the impasse crippling Spanish politics - which now looks set to lead to the increasingly-likely prospect of a third election on Christmas Day this year - is starting to take its toll. So what's the hold up?

In the runup to the referendum, we heard repeated warnings that, whatever the outcome of the actual vote, the damage to the UK economy had been done. The Bank of England, whose governor has been accused of becoming something of a fellow traveller for Project Fear, warned in its Monetary Policy Committee meeting in March that: ‘There appears to be increased uncertainty surrounding the forthcoming referendum on UK membership of the European Union’. In April, the BoE was at it again, downgrading second-quarter growth from 0.5 per cent to 0.3 per cent. Warnings such as these risk of being self-fulfilling: if you talk about uncertainty, it’s hardly surprising that investors feel uncertain, creating a knock-on effect out of nowhere.

For all Gordon Brown’s economic mistakes, he at least tried to build confidence in the British economy. In the build-up to the European Union referendum, David Cameron and George Osborne did the opposite. Osborne, as Chancellor, ignored the good news, accentuated the bad and tried to portray Britain as an economic weakling propped up by EU membership. He was joined by a great many investment banks who produced analyses saying that Britain’s life outside the EU would be catastrophic. Since the referendum, these anticipations of doom have continued. It is rather strange to watch. Encouraging economic news — the increase in high-street spending, the buoyant demand for jobs through recruitment agencies — is brushed aside.

It is still a little too early to say for sure that George Osborne’s gloom-laden economic forecasts for post-Brexit Britain were bunk. But never mind the future, it now emerges that he wasn’t much good at telling us what was happening in the present. Throughout the referendum campaign he could barely disguise his contempt for the whole exercise, telling us that the UK economy was suffering from the mere fact we were having a vote. A week before referendum day, for example, he told us that  'The economic uncertainty that the ‘Leave’ campaign carelessly insist won’t be caused is already being seen.' Whatever he was seeing, it didn’t reflect reality. The growth figures for the second quarter released today reveal that in fact the economy grew by 0.

It has been a month since the UK voted to leave the European Union — but something is missing. Where is the economic collapse? What of EUpocalypse Now? Where is the Brexageddon that we were promised? To the shock of many — not least business titans who bankrolled the Remain campaign — the instant collapse doesn’t seem to be happening. The UK economy is, for now at least, taking Brexit in its stride. The oft-predicted job losses? During the three weeks from 23 June, job listings were up 150,000 compared to the same period last year according to Reed Group, a recruitment consultant. ‘That’s an 8 per cent rise,’ says James Reed, its chairman. ‘The vote hasn’t affected things — people are still hiring.