The Brexit saga continues. As Darren Winters explains, the pound has hit a 31 year low against a basket of currencies. Put bluntly, Brexit is making Britain poorer and to argue otherwise would be a fiction.
The Brexit saga is the latest example which proves that no country has been able to successful depreciate its currency to prosperity
Despite the pound depreciation against the euro the Brexit saga is the latest example which underscores the above. GBP sterling is the worse performing currency amongst the G7 most industrialized nations. Moreover, as Darren Winters points out, the collapsing pound doesn’t appear to provide UK exports with a headwind. The UK Auto manufacturing sector has contracted to its lowest level in a decade with a 20 percent fall in output, according to a piece in the FT, dated December of last year. FT.
The Brexit saga is now having a very real negative impact on the UK economy. Indeed, the latest GDP data shows that the UK economy had its first contraction since 2016 with the UK economy contracting by 0.4% in April.
The decline was due to a 3.9% contraction across manufacturing, the worst decline since 2002, as UK car producers implemented relocation plants in what now looks very likely that Britain will leave the EU, a one trillion USD trading bloc without a deal on October 31
The worst-case scenario, the likely scenario, of the UK exiting the EU on a no deal-WTO option hasn’t halted the tide of contracting UK capital expenditure.
Rob Kent-Smith of the Office for National Statistics summed up the Brexit saga
“GDP growth showed some weakening across the latest 3 months, with the economy shrinking in April mainly due to a dramatic fall in car production, with uncertainty ahead of the UK’s original EU departure date leading to planned shutdowns,” wrote Rob Kent-Smith.
“There was also widespread weakness across manufacturing in April, as the boost from the early completion of orders ahead of the UK’s original EU departure date has faded,” he added.
The Brexit saga means that the UK macroeconomic data is likely to follow a downward trajectory
The NIESR think tank’s GDP tracker is forecasting for the UK economy to contract by 0.2 in the second quarter of this year. But that might be too conservative. A collapsing currency, a cut in CAPEX spending, a decline in construction and what outsiders perceive to be political radicalism is a headwind like none other.
Brexit do or die touted by the new Prime Minister BoJo is becoming unpalatable