SIX YEAR HANGOVER23 Jun 2022 22:27
Today, on the sixth anniversary of the referendum, Bloomberg’s markets reporters show that Brexit has depressed UK assets, making it harder to recover from this year’s market meltdown.
With the pound down 10% in 2022 alone (and 18% since the referendum), Societe Generale’s chief FX strategist, Kit Juckes, told our team that sterling is now a “basket case”.
“It’s forecast to have weaker growth, higher inflation, and a bigger current-account deficit than the US, eurozone or Japan next year, not so much trilemma as tragedy.”
UK corporate bonds are on their longest losing run ever (and this Bloomberg survey suggests further woe to come). There is disruption to immigration and supply chains, plus poker -hot inflation.
UK businesses are also braced for a deeper economic slump. Steady yourself for a “ troubling combination” of recession and inflation, says the chief economist at S&P Global. “The economy is starting to look like it’s running on empty.”
It’s at this point that Conservatives cry “Project Fear” and rail against glass-half-empty City gloomery. The man who negotiated the UK’s trade deal with the EU, David Frost, tweeted as much this morning.
But the (Tory) chair of Parliament’s Treasury select committee says the current 10% plunge in the value of the pound is making the cost of living crisis worse. The mood on sterling may be shifting, our reporters say, from “indifference to alarm”. There are signs also of politics overriding prudent economics, which will worry the Bank of England and investors.
Clearly the pandemic poleaxed many advanced economies. As prime minister, Johnson points to a nimble UK response to the Ukraine crisis as among the benefits of Brexit. His spokesperson today highlighted new trade deals, the forthcoming bill of rights and plans to repeal EU laws.
Whitehall insiders also dare to hope that sterling’s slump might stimulate international firms looking for a bargain.
Even so, our reports suggest that today, six years on, the UK is still searching for its post-Brexit “swoosh”.
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