Cloudy, with a chance of sunshine
A year after voters opted to leave the European Union, the shape of a post-Brexit UK is yet to be determined. Negotiations between Downing Street and Brussels rumble on, and a cloud of uncertainty still hangs over the national economy. Yet there are glimmers of positivity shining through.
The result is an economic picture as varied as a weather map of the UK on a spring day.
So, while the FTSE index of leading UK shares is at an all-time high, nudging 8,000 points, rates of business and personal insolvencies are also setting records.
Average house prices – a key bellwether of economic health and consumer sentiment – have never been higher, yet in London and the affluent southeast, prices have dipped slightly in the past year.
In May, official statistics on the first quarter of 2018 showed that the national economy had experienced its slowest rate of growth since 2012. The Office for National Statistics said the economy grew just 0.1 percent between January and March, part of what it described as a pattern of slowing growth due to dampened consumer sentiment and a decline in post-Brexit-vote business investment.
Yet in the same week, the ONS also reported that retail sales had seen their biggest monthly rise in nearly two years, with a 1.6 percent increase in April over March, beating market watchers’ expectations. This encouraging news followed a sluggish start to the year for retail that was blamed largely on the weather; snow storms at the start of the year led many shoppers to stay at home and caused major disruptions to deliveries of goods bought online.
Weather-related problems for the retail sector were salt in the wound for many High Street retail brands already struggling to adjust to an increasingly e-commerce-focused consumer. In the past year, several shopping stalwarts have shut their doors for good – including Toys R Us and electronics specialist Maplin – while Mothercare, Marks & Spencer, Carpetright and Carphone Warehouse have announced plans to close hundreds of under-performing stores.
The good-news-bad-news roundabout extends into the country’s employment figures; unemployment has been declining steadily over several years, and the national jobless rate is under 4.5 percent. This is the lowest level of unemployment in the UK since 1975. What’s changed in the past year is that average wages have started to pick up after several flat years; a record high level of employment and a drift from part-time to full-time work has led to fatter pay packets, and in the three months to January, average earnings were 2.8 percent higher than a year earlier.
And while official data shows that overall business investment in Q1 2018 declined 0.2 percent over the previous quarter – the worst performance since mid-2015 – the UK’s technology sector enjoyed record investment in 2017. The industry attracted almost four times more funding than Germany’s tech sector, and more than France, Ireland and Sweden combined.
London in particular has proved a magnet for tech investment despite the uncertainty over the likely fallout from Brexit. Tech firms in the UK attracted close to £3 billion in venture capital in 2017 – almost double the amount in 2016 – and around 80 percent of that went to businesses based in London. Deliveroo, mobile network Truphone and gaming platform Improbable were among the biggest recipients of investment.
The future of the UK, post-Brexit, remains as uncertain as ever, but what is clear is that innovators are making hay while the sun shines.