Six graphs showing the state of the UK economy a year after Brexit referendum

It has been a year since British voters went to the polls and voted by a narrow margin to leave the European Union. The Brexit referendum triggered a heated debate about the potential economic effects of Brexit. But what has actually happened to the UK economy in the year since the Brexit vote? These six graphs help explain.

GDP growth

Overall, the UK economy performed relatively well in terms of GDP growth during the second half of 2016 following the referendum. However, more recently there have been indications of a slowdown in economic activity in the UK.

The pound

The British currency was one of the economic variables that was most affected by the decision of the British electorate to leave the EU. Sterling has depreciated by a significant amount, around 15%, since last year as international markets reacted to the announcement of Brexit. A standard explanation is that markets expect lower volumes for future UK-EU international trade and also that longer term projections for future UK growth could be revised downwards.

Inflation

The depreciation of the pound has contributed to a significant rise in the price of imports into the UK. British consumers are now having to pay a much higher price for foreign products. As a result, inflation increased from 0.5% in June 2016 to 1% in September and 2.9% in May 2017, the highest in four years. This is likely to affect both businesses that import products, and consumers.

The rise in inflation also raises challenging questions for members of the Bank of England’s Monetary Policy Committee (MPC), which sets UK interest rates, and has a target to keep inflation below 2%. The MPC could tighten monetary policy by raising interest rates in order to reduce inflation, but this will probably hurt households and potentially GDP growth. Alternatively, it could decide to ignore inflation for the moment and lower interest rates even further. Or do nothing. In June 2017, members of the MPC remained divided over whether it is the right time to raise interest rates.

Average earnings

In the labour market, the most notable change has been a drop in real weekly earnings since the end of 2016. Average weekly wages (excluding bonuses) fell from £461 in June 2016 to £459 in December 2016 and £458 in April 2017. This is the result of weak nominal wage growth (closely related to the UK’s productivity puzzle), combined with the steady rise of inflation. Real wages have fallen in the UK and people are beginning to feel the pinch.

Household savings

The drop in average earnings could have serious consequences for future UK GDP growth. This is both because household savings have steadily depleted in recent years, and recent UK GDP growth was driven by consumer spending. If consumers have less in their pay packet each month, the economy could slow further.

The households savings ratio attempts to present a picture of how much money households save as part of their income. When the savings ratio is very small, it implies that households have fewer savings relative to their disposable income. In 2016, the ratio was at 5.2%, its lowest level since records began in 1963.

Trade balance

One potential positive effect of the pound’s devaluation could have been an improvement in the UK’s trade balance – but that has not yet materialised. Standard economic theory predicts that currency devaluation will reduce a country’s imports (which become relatively more expensive), increase exports (relatively cheaper) and so improve the trade balance.

The UK’s trade deficit was around £175 billion at the time of the referendum in June 2016. Since then, although exports have risen by 12%, imports have risen at the slightly faster pace of 12.7%. As a result, the UK’s trade deficit had worsened to £197 billion by the end of March 2017.

A trade deficit is not a problem per se, but a devaluation could have brought a sizeable increase in the export sector and helped to boost employment and wages. There are a number of reasons for why this did not happen, with one being that UK exporters have not reduced the prices of goods sold abroad in foreign currency, and so just increased their profits per unit sold.

The UK economy performed relatively well until the end of 2016, but there are signs that 2017 is going to be a challenging year. There is some evidence – although early – that the economy is slowing down. Bloomberg’s Brexit Barometer, an index tracking the impact of Brexit on the economy, has fallen in recent months, but does not put the economy in a “worse state” than before the referendum.

Of particular interest is going to be how households will react to the rise of inflation and the erosion of their real income given that their savings are at historically low levels. And don’t forget the increasing uncertainty that Brexit negotiations and tactics will bring to the economies of both the UK and EU.

Source: The Conversation

The youth vote could topple the ANC | News24

Comment on the youth vote by Melanie Verwoerd – formerly an ANC MP and Ambassador to Ireland:

On Friday, at an event organised for Youth Day, President Zuma addressed a big crowd in Ventersdorp. Of course, none of his handlers wanted a repeat of the May Day fiasco, where he was booed and eventually had to leave without addressing the crowds.

From the TV visuals it was clear that the organisers were taking no chances and brought in hundreds of children in school uniforms.
The children looked utterly bored as the president read a prepared speech in his usual halting manner – until a group of students started chanting: “Zuma must go; Zuma must go”. Now you have to pity the man. They “rent a crowd” and STILL he gets booed. He must really feel he can’t win.

On a more serious note, there was a sad irony in the image of young people being roughly escorted out by bodyguards of the president for protesting against the current political regime on the day that we commemorated the events of June 16. Source:  News24

Finland tests an unconditional basic income

JUHA JARVINEN, an unemployed young father in a village near Jurva, western Finland, brims with ideas for earning a living. “I’m an artist and entrepreneur. Sometimes I’m too active, I don’t have time to stop,” he says. He just agreed to paint the roofs of two neighbours’ houses. His old business, making decorative window frames, went bust a few years ago. Having paid off debts, he recently registered another, to produce videos for clients.

Mr Jarvinen says that for six years he had wanted to start a new business but it had proved impossible. The family got by on his wife’s wages as a nurse, plus unemployment and child benefits. Mr Jarvinen had a few job offers in the main local industries—forestry, furniture-making and metalwork. But taking on anything short of a permanent, well-paid post made no sense, since it would jeopardise his (generous) welfare payments. To re-enroll for benefits later, if needed, would be painfully slow. “It is crazy, so no one will take a bit of work.”

Source: Economist

Commonwealth grants recognition to LGBT Equality Network · PinkNews

The Commonwealth has granted legal recognition to an LGBT group for the first time.

The group of countries, comprised primarily of former territories of the British Empire, have a poor record on LGBT rights.

 Many maintain anti-gay laws that are a part of British colonial legacy, with archaic penal codes and laws criminalising gay sex that were simply never repealed across the vast majority of the Commonwealth.

However, over the past few years activists have made a concerted push to get the Commonwealth to address LGBT issues.

In a win today, the Commonwealth approved the accreditation of the Commonwealth Equality Network (TCEN), making it the first LGBTI-focused organisation to be officially accredited by the Commonwealth.

More: · PinkNews

Russia’s ‘Gay Propaganda’ Laws Are Illegal, European Court Rules – The New York Times

Russia’s prohibition of what it considers the promotion of homosexuality is discriminatory and violates freedom of expression, Europe’s top human rights court ruled on Tuesday, in a stinging rejection of laws that rights groups say have been routinely used as cover for abuse and violence.

Homosexuality was decriminalized in Russia shortly after the fall of the Soviet Union, but gay, lesbian, bisexual and transgender people are often subject to discrimination, persecution and worse.

The prohibition, which was codified in national law in 2013, has been seen as a central plank of President Vladimir V. Putin’s nationalist appeal, one that has positioned Russia as a defender of Christian and traditional values, and the West as decadent and godless.

More – The New York Times

Britain: The End of a Fantasy | by Fintan O’Toole | NYR Daily | The New York Review of Books

To understand the sensational outcome of the British election, one must ask a basic question. What happens when phony populism collides with the real thing?

Last year’s triumph for Brexit has often been paired with the rise of Donald Trump as evidence of a populist surge. But most of those joining in with the ecstasies of English nationalist self-assertion were imposters. Brexit is an elite project dressed up in rough attire. When its Oxbridge-educated champions coined the appealing slogan “Take back control,” they cleverly neglected to add that they really meant control by and for the elite. The problem is that, as the elections showed, too many voters thought the control should belong to themselves.

More at:The New York Review of Books

GroundUp: South Africa is making progress against its most deadly disease | Daily Maverick

South Africa is making progress against tuberculosis (TB) but much more needs to be done. This was the message presented by Dr Nazir Ismail, the head of the Centre for Tuberculosis at the National Institute of Communicable Diseases (NICD). He was speaking at the South African Aids Conference in Durban on Wednesday.

Ismail was presenting results from a study conducted between 2004 and 2015 that was published earlier in 2017.

The study found that over the 12-year period, there were over three million microbiologically confirmed pulmonary cases of TB. However, this excludes KwaZulu-Natal for the period 2004-2010 for which data was unavailable. But rates of TB are dropping. In the last three years of the study, TB cases dropped between 4% and 6% year on year.

Source: GroundUp: South Africa is making progress against its most deadly disease | Daily Maverick

Everyone said Old Europe was dying. Sure doesn’t look like it now. – The Washington Post

Frence President Emmanuel Macron, centre, poses for a photo

Remember Old Europe? It was said to be dying, it was becoming irrelevant, it was a “corpse” to which British Brexiteers did not want to be shackled — and now, suddenly, it isn’t. Suddenly it looks more stable, more hopeful and especially more consensual. There is talk of reform and renewal, not revolution. Growth is up. Predicted far-right surges have failed to materialize.

Paris and Berlin are united and confident, while Washington and London are divided and dysfunctional. Something is rotten in the Anglo-Saxon world, or at least its U.S.-U.K. axis. Although it’s too early to be definitive, here are some guesses as to why:

Source:  – The Washington Post

How to turn a chaotic election result into a better Brexit

THERESA MAY called a snap election two months ago to build a “strong and stable” government. How those words will haunt her. On June 8th voters decided that, rather than transform her small majority into a thumping one, they would remove it altogether. The result is a country in an even deeper mess. Mrs May is gravely wounded but staggering on. If and when she goes, yet another election may follow—and its plausible winner would be Jeremy Corbyn, of Labour’s far-left fringe. On the eve of the Brexit referendum’s first anniversary, the chaos it has unleashed rumbles on unabated.

With negotiations due to begin in Brussels in days, the circumstances could hardly be less promising. Yet the electoral upset has thrown up a chance for Britain and the European Union to forge a better deal than the one which looked likely a week ago. Because Mrs May’s drastic “hard Brexit” has been rejected by voters, the question of what replaces it is back in play.

More at Economis

European support for EU surges in wake of Brexit vote

Support for the EU among its citizens has jumped sharply since the Brexit vote, even as Europeans expressed doubts about Brussels’ handling of migration, trade and the economy.null

Countries including Germany, France and even the UK all reported a big rise in the number of people with a favourable view of the EU as the bloc’s reputation recovered from a series of crises in recent years.

Britain’s vote in June last year to leave the EU has helped coalesce support for the bloc among the 10 countries surveyed, according to the analysis by Pew Research Center, which surveyed just under 10,000 people.

More at Finacnial Time