The Political Economy Review 2017

rebalance the economy, with the re-birth of UK manufacturing. Firstly, this is very unlikely given the extent to which the economy relies on services, and secondly, this 'opportunity' can only occur, of course, if foreigners buy British goods and services. They most probably will until March 2019 (when Britain formally leaves the EU), however, after that, the future is uncertain. Assuming Britain no longer enjoys the benefits of the Single Market and must form a new comprehensive trade deal with the EU, they most probably won't to the same extent, if varying tariffs are added on top. Even if the UK boosted demand in the form of exports, let's not forget how much we import, and hence, how much inflationary pressure there is going to be. This contraction caused by inflationary pressure vastly outweighs the possible improvement in the trade balance, as shown by growth figures since last June. UK GDP growth has slowed since last June, and Britain hasn't even left yet. In 2016, despite the Brexit vote, the UK economy grew by 2%, but now 'project fear' is turning into 'project reality'. The CBI predicts 2017 growth at 1.6% and 2018 growth at 1.4% driven by a fall in consumption. In the event of no deal, many leading experts are convinced a recession would unfold. However, these numbers do not tell the full story. Firstly, as mentioned earlier, this slowdown is eased by a rise in exports, which doesn't necessarily affect the ordinary consumer who is suffering from negative real wage growth. Furthermore, given the falling rates of unemployment we have seen, the economy should be growing, but it is clear that as real wages are falling, ordinary working families (or those 'just about managing') will have to reign in their consumption. Further evidence of a Brexit slowdown is that Mark Carney stated in his Mansion House address that 'now is not yet the time' for a base rate rise (despite rapidly growing inflation), as the MPC remains scared about the 'Brexit squeeze' on consumption. Mr Carney also clearly implied in his address that Brexit would make the UK

economy poorer. Along with Philip Hammond, he predicts further 'price rises and job losses' as the UK leaves the EU. A further sign of the dismal times is that the target to balance the budget has been postponed until 2025, due to Brexit. This, however, is not so the Treasury can end austerity, but to pay for the cost of Brexit. Austerity and its painful consequences will be extended due to Brexit as the government will receive less in tax receipts in the coming years. Therefore, by looking at what has happened and what is predicted, workers will be hit not only by

poor wage growth but by strained public services.

Britain's negotiations with the EU will, of course, be uncertain. However, there is something we do know - they won't go well (and there will be a significant administrative cost). What the government has done over the last year is all the proof you need.


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