28th November 2016

UK Economy still strong as political battle rolls on

The latest good news about the UK economy is a solid figure for business investment in the third quarter, the most recent one following the Brexit vote.

While we are sceptical about economic forecasts, this was the one figure we believed was most likely to have been hit by the vote, as we thought the increased uncertainty around the UK’s path away from the EU was likely to cause businesses to delay investment.

It is hard to know how to take this: is investment strong because businesses are not thinking two and a half years’ ahead (to the time we would leave the EU if Article 50 is invoked in March)? Or is this a sign that the euro sceptics were right and our EU membership is not crucial to confidence in UK plc?

The answer is probably a bit of both, which means that weakness in this number should show up over time. It may also mean there is more to go in the recovery of the domestically-focussed mid and small caps versus the large cap foreign earners, at least in the medium term.

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