September, 30 2016 by lsr team

Buoyant UK consumers to fight off Brexit risks

Events such as Brexit throw a spanner in the works of economic models and analysts are left with a wide range of plausible inputs. At the worst extreme, fear of Brexit becomes self-fulling and weighs on spending decisions, in turn crimping consumers’ style. Over-gloomy estimates prompt businesses to delay expansion plans. Firms make their capital spending projections based on these forecasts and they have not been in short supply. Undoubtedly, capex plans will be adversely affected by the uncertainty hanging over them. While a wide range of business sentiment indicators have rebounded from their July lows, investment intentions indicators generally point to a clear slowdown in business investment. This would likely produce a significant drag on overall GDP growth. But it is useful to remind ourselves that the EU accounts directly for only one tenth of UK’s value added.