Economists are even more worried about the consequences of Brexit than they were a year ago, despite the economy showing little obvious damage after the vote to leave the EU in June.
In the annual FT survey of UK economists, with 122 respondents, a large majority expect growth to slow in 2017 as higher inflation hits household incomes. The vast majority were either more pessimistic about Britain’s long term economic prospects after leaving the EU than they were a year ago or had not changed their views.
With growth slowing and any US stimulus from the election of Donald Trump unlikely to provide a transatlantic boost, economists also expect the public finances to perform worse than predicted in the Autumn Statement by Chancellor Philip Hammond. Attacks on the economics profession for past forecasting errors, especially from Leave campaigners, have not yet led to a significant change of thinking about Brexit.
“The evidence that Brexit will damage long-term performance is substantial,” said Professor Martin Weale of King’s College London and a recently departed member of the Bank of England’s Monetary Policy Committee. “The experience of the last two quarters has no bearing on this.”
While a narrow majority a year ago thought a vote for Brexit would rapidly worsen the outlook, nine times more economists thought Brexit would damage Britain’s long term prospects than improve them. In this year’s survey, 47 per cent stuck to the same views about the long term, while 40 per cent were feeling more pessimistic. Only 13 per cent said they had become more optimistic about leaving the EU.
Kathrin Muehlbronner of Moody’s Investor Services said the economic impact “depends crucially” on the new relationship Britain strikes with the EU and she still thought the result would be worse than today.
Economists also remain gloomy about the government’s prospects for cutting public borrowing as quickly as planned this year. This is not only because many of them expect lower growth than the official forecasts from the Office for Budget Responsibility suggest.
Economists also warn taxes may again generate lower revenues than expected, despite a significant downwards revision by the OBR last November.
