UK Economic Outlook 2025 Post Brexit

The prospects of the global economy turned very negative against the UK in the past few months.
Concerns are arising against UK about possible recession. There is one in three chances of possible
recession, and also no-deal Brexit would even cause slower growth. Reasons are quite evident, pound
continued to decrease in value against US dollar is very low as compared to last two and half years.
There's also sharp decline in UK manufacturing. Compared to fourth quarter of 2018, quarter of 2019
GDP has increased by 0.5% as compared to 0.2% mainly because of businesses stockpiling. Many firms
expected EK to leave EU on 29th March. Businesses purchased large stock volume by increasing their
inventory size by £6.7 billion, which means inventories play a large factor in GDP growth.

Brexit cliff edge uncertainty is set to haunt businesses and consumers for the next few quarters. The
stockpiling impact will be only for few days to come by and it's temporary in GDP growth. Its strength
in quarter one is unlikely to be repeated in coming quarters. The estimate for April GDP of 0.4%
contraction month-on-month is already pointing at some slow-down in Q2.

Spring statement - Brexit deal could end austerity, but benefit freeze continues, UK finances are pretty
strong right now but also might receive positive and negative surprises from the chancellor. I think
they're two conflicting pressures on the property finances in the sort of background to the spring
statement. The first is that the economy is slowing down. Though expect a slowdown in the economy
to generate less tax revenue to make public finances less good where it's a fairly mature stage of the
economic cycle, and so that means that tax receipts that have accumulated you know from profits and
self-employment income are starting to come through more strongly. Public finances are looking much
better. I would expect the Chancellor to use some of that benefit to try and support the economy as
we go through the Brexit process through people. Everyone believes that the autumn budget is a
ridiculous idea but wouldn't it be impossible for the Chancellor to deliver a full spring budget now
given all of that uncertainty around Brexit. I mean so so we've been through this cycle before we went
through it in the 1990s when Ken Clark introduced an autumn budget and found that as you get close
to the start of the financial year. Things have changed, and therefore I wouldn't rule out there being
some substantive measures in the spring but the statement as it's they're called it's not a proper
budget. The notion that you can settle everything in the autumn when the financial year will last you
know for 18 months you know beyond that seems to me to be unrealistic the OECD recently
downgraded its outlook for UK GDP.

After UK exit Brexit I possibly think the UK is like to be growing in the next year or two by somewhere
around about 1% perhaps a little bit stronger than that and there are two reasons for that. First is
Brexit itself but also reaching a more mature phase than the global economic cycle. The global
economy is slowing down and so when it’s major trading partners in Europe and elsewhere in the
world are slowing down. It’s going to have an impact on our growth. I think we have to be realistic
about the sort of growth rates we expect in what I call this new normal environment, so 1 to 2 percent
growth for the UK economy is quite good.

It is over a decade since the financial crisis, and we see several economies around the world. Italy now
in recession, Germany narrowly saving. China seeing in serious economic downtown. They have been

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two major impacts from Brexit on the UK economy so far one is the fact that the pound fell quite
substantially and they're still languishing in pretty weak

Territory. Even though inflation is now coming down that has been a squeeze on consumers. Secondly
that they've had the uncertainty impacting investment, and if you look at the latest figures for the
investment I think in quarter four of last year business investment was nearly four percent down in a
year ago which is very disappointing performance.

When the world economy has been performing quite well, Bank of England pointed to the fact that
the pound has just depreciated considerably I think that's creating a bit of a divide at the Bank of
England about what to do in the case of an Odile Brexit because it's expected that that would lead to
a sharp slump in the pound.

Some members on the MPC think that that means that we should raise rates others think that because
of the decline in GDP that could come about we should be cutting rates where you stand on that
debate.

In the case of a No Deal Brexit the Bank of England should be raising rates you know that's going to be
a quite a negative scenario for the UK economy and the financial stress test that the bank put out
quite recently suggested they might raise rates to over 5%. In this scenario, it seems to be ludicrous
they'd barely struggled to raise interest rates by a quarter or a

half a percent in recent times. So we can expect that in the case of a No-Deal Brexit which is something
that people don't want to see here and I hope we don't see interest rates would remain low and that
would be the most sensible thing to do so.

Mark Carney has recently said that he thought that a No Deal brett's it wouldn't be as bad as he said
it would be three months ago so where do you stand on this how bad would have no deal be for the
UK economy well.

I think there are two aspects to a No Deal Brexit one is the short-term dislocation which could last
three to six months, but I think the economy would adjust to that and then I think the other
consequences would be much longer term in terms of the fact that we would find it difficult to re-
establish our trading relationships.

But the notion that the Bank of England puts out that this would create somehow the worst recession
since the 1930s seems to me to be totally unrealistic and that was a product of the assumptions that
they chose so it's not a good outcome, but it's probably the most of the bad news would be in the
short term over three to six months now when we look at other central banks around the world.

The Fed has recently taken its foot off the pedal in terms of further hikes the ECB has recently
reimplemented this tell TRO program, and it extended its forward guidance, so it looks like rates are
going to be lower for longer.

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Bank of England is going to follow its rather predictable course of doing very little. The Fed has had
quite a sensible policy. I think the Bank of England has a similar problem we don't seem to have a very
sound exit strategy we've got interesting rates at 3/4 of a percent so what happens if there's some
downturn in the global economy or the UK economy. Ten years on from the start of this recovery of
having raised interest rates gradually and the Bank of England's missed so many opportunities
particularly in 2014-2015 to get interested rates up to sort of a 2 percent level which would be quite
sensible. I think I've lost confidence in their strategy of really trying to normalize monetarily. It looks
pretty strong, but there are of course question marks around the productivity issue well the labor
market has performed well in terms of employment.

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