Markets, he said, moved instantly by revaluing sterling; households looked through the turmoil and kept spending, at least until the pound’s fall led to higher prices in the shops; businesses were in between, waiting to see what it meant, according to ft.com.
Data published this week suggested that businesses have now firmly made up their minds. The effects of Brexit uncertainty are biting into the economy.
June’s surveys of purchasing managers pointed to stagnation in the services sector and the steepest contraction in manufacturing activity for six years.
Executives in the construction industry said activity fell to the lowest level for a decade. In total, the three surveys pointed to a contraction in private-sector output during the second quarter of the year, the first in Britain since the eurozone crisis in 2012.
Households, however, still appear relatively indifferent. Instead of cutting back, Britain’s consumers are borrowing and spending. Figures out last week showed that they spent more than they earned for a record tenth consecutive quarter during the first three months of 2019. On a cash basis, they put just one percent of their income into savings compared with about four percent before the Brexit referendum.
Outside London and south east England, where buy-to-let and foreign investors make up more of the market, house prices have continued to rise, providing reassurance to house price-obsessed Britons.
Higher levels of personal debt since the 2016 vote come from student and car loans, but credit card borrowing is still growing at an annual rate of about six percent, according to Bank of England figures.
The data provide both a rebuke and a warning to the two candidates for the Tory leadership. Both men are irresponsibly promising a no-deal Brexit if they cannot get what they want from Brussels.
The fast-increasing likelihood of such an outcome is now actively harming the British economy as businesses stop investing. Consumers, meanwhile, are unprepared for the disruption it would bring.
High employment has supported spending, but families have little buffer to see them through another rise in prices or an increase in unemployment if some businesses shift operations out of the UK.
Consumers have a sense of unreality over the risks now facing the economy. Overall measures of consumer confidence are low and Britons say the general economic situation is likely to get worse over the next 12 months — but they predict their own finances will remain satisfactory.
Many, even those who voted Remain and believe Brexit can only end badly, expect to be immune from any wider economic disruption. Politicians should not bank on this contradiction resolving itself favorably, or on voters thanking them for shattering their illusions.
The UK economy is facing a cliff edge on the next scheduled Brexit date of October 31. For all the capacity they have shown to keep on spending, consumers will not be able to defy gravity if the UK suffers an economic shock.
Businesses have warned they have little ability to reserve additional warehouse space to stockpile essential goods in October, as they did in March, since most is already booked up for the vital Christmas trading season. Supermarkets have said they will not be able to guarantee food supplies.
Unless a no-deal Brexit is taken off the table altogether, the outlook for Britain’s economy is one of storm clouds gathering on the horizon.