Brexit has produced numerous for and against debates at every level of British life, with varying degrees of confidence and concern. Now that several weeks have passed, the first wave of viable statistics has emerged, leaving politicians and economists to determine the implications.
Thus far, aside from sterling’s fall in value, the UK economy is yet to experience high drama. Currently, the country is enduring a mixed summer in which retail sales have improved but the trade deficit has widened. In the longer-term, what can be drawn from the latest economic research?
Retail spending rises in July
Towards the end of July 2016, market research specialist GfK announced an 11-point fall in UK consumer confidence for the month. The decrease was described as the “[s]harpest monthly fall for more than 26 years.” In addition, GfK’s Head of Market Dynamics Joe Staton explained some respondents were experiencing greater concern following Brexit.
GfK’s July results inspired dramatic headlines from media outlets, with some commentators raising immediate concerns for the UK economy. Just over a week later, however, analysts had to reconsider their positions after the British Retail Consortium published BRC-KPMG Retail Sales Monitor (UK) for July 2016.
In the findings, it emerged the UK’s high street and online retail sales grew by 1.9% in July 2016, representing the highest monthly growth since January 2016. Comparatively, the retail sales were also a 1.1% improvement on July 2015’s performance.
KPMG Partner and Head of Retail UK David McCorquodale explained how July’s good weather encouraged consumers to get out and spend. Barclaycard’s latest results support Mr McCorquodale’s rationale, with the credit card provider reporting spending increases of 12.8% for restaurants and 12.2% for bars.
UK retail spending has remained positive after the referendum, but Barclaycard Managing Director of Corporate Affairs Paul Lockstone believes consumers will exercise caution in their future spending plans, with external factors now more relevant to their decision-making.
Trade deficit widens in June
Meanwhile, there have been more question marks at the wider economic level. Following the release of the Office for National Statistics’ (ONS) latest trade bulletin, it was revealed the UK’s trade deficit between goods and services increased from approximately £4.2bn in May 2016 to £5.1bn in June 2016.
The cause of the imbalance is a £12.4bn deficit for trade in goods during June 2016, with £24.6bn worth of exports not enough to offset £37.0bn in imports. Some analysts are concerned the trade deficit leaves the UK exposed to major financial shocks.
From July 2016, however, there could even be a short-term improvement as the weaker pound starts making British exporters more competitive with lower prices in foreign markets. Further, ONS Chief Economic Adviser Joe Grice is unconvinced Brexit has been a major issue: “Any uncertainties in the run-up to the referendum seem to have had little impact on production”.
Ultimately, things are still settling after the vote, meaning any definitive judgments on the impact of the latest statistics are premature. In the months ahead, Dukes Bailiffs will provide informed financial advice to any SMEs in need of assistance.