Health check

Health check

With Theresa May about to trigger Article 50 and the UK set to start two years of Brexit negotiations with the rest of the EU, how is the country's economy doing?

Before the referendum last June, many economists produced gloomy forecasts which have since been proved wrong. Consumers' confidence has not suffered, and by and large, things have gone on as before.

However, the UK has not actually left the EU yet - the real change may only happen once it does.

The current uncertainty, ahead of talks between the UK and the rest of the EU, over what form Brexit will take is an issue for many firms when it comes to investment planning.

It has also increased import costs for manufacturers (see Trade below) which is a key factor for sectors such as the car industry, where vehicles which may be completed in the UK often have imported component parts.

Record low UK interest rates have also contributed to a weaker pound.

When Parliament passed the Brexit bill allowing the prime minister to trigger Article 50 and start the Brexit negotiations, the pound hit an eight-week low against the dollar.

Currency strategists say that sterling is likely to remain volatile in the coming months until there is greater clarity about the UK's Brexit deal.

Health check

The pound may have weakened but investor confidence as measured by UK share prices is holding up well - UK stockmarkets have risen since last summer.

The FTSE 100 has risen 16% since the eve of the referendum.

Much of this could be linked to the pound's decline. As big companies' profits are often international and calculated in dollars, they would automatically rise when converted back into the weaker pound.

Yet there is a similar picture when looking at the mid-range FTSE 250, which includes many firms focused on the domestic market. This index is now about 11% higher than it was on 23 June 2016.


Health check

The unemployment rate has been falling steadily over the last five years, as the UK recovered from the global financial crisis, which saw up to two million jobs lost, according to one report.

Wages have been growing faster than inflation in recent months, though the gap is narrowing, leading to warnings of squeezed incomes.

In the three months to January, regular pay increased by 2.3%, compared with the same period a year earlier. That was sharply lower than the 2.6% seen in the three months to December.

Meanwhile, inflation currently stands at 1.8%, up from 1.6% a month ago.

Real income growth is now running at 0.6%.

"If the incomes squeeze translates into falling consumer confidence, then the main driver of the better-than-expected economic news since the referendum could turn more negative," says the BBC's economics editor Kamal Ahmed.



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