Brexit: UK public are becoming more pessimistic over economic impact of EU withdrawal, finds Bank of England

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The British public has become more pessimistic about the economic impact of Brexit, a major new survey for the Bank of England has found.

A survey by NMG of some 6,000 households, conducted in September, shows that the proportion of households expecting leaving the European Union to harm the UK economy has risen since the second half of 2016.

A net balance of around 35 per cent of households now think Brexit will do damage over the next 12 months, up from around 20 per cent in the wake of the referendum in June 2016.

The proportion of of people who expect Brexit to result in an increase in their own household spending actually rose relative to the second half of 2016, but the Bank said this was likely to reflect higher inflation this year, stemming from the plunge in sterling on the night of the referendum.

Inflation hit 3.1 per cent in November, the Office for National Statistics reported this week.

The survey also shows that the net percentage balance of households expecting an improvement in their personal financial situation over the next year has turned negative for the first time in three years.

Growing pessimism

The UK economy is projected to grow by just 1.5 per cent over 2017 by the Office for Budget Responsibility.

This would be down from 1.8 per cent last year and the weakest expansion since 2012.

Other surveys in recent weeks have signalled a continued tailing off of consumer confidence in recent months, although headline retail sales were relatively strong in November on the back of Black Friday bargain hunting.

Household spending is a dominant element of the economy, accounting for around 60 per cent of GDP.

With business investment weak since the referendum vote due to uncertainty about future trade arrangements, household consumption been virtually the sole driver of overall output growth over the last year.

The NMG survey, published as part of the Bank’s Quarterly Bulletin, is more positive when it comes to the economic impact of the Bank’s decision last month to raise interest rates for the first time in a decade, from 0.25 per cent to 0.5 per cent.

The data collected by the survey, and analysed by the Bank, implies only around 2.5 per cent of UK households with a mortgage will need to take action because of the increase in the cost of borrowing.

The NMG survey was conducted online between 6 and 26 September.

The Bank’s Monetary Policy Committee this week said that the Brussels Article 50 breakthrough last week, enabling UK trade talks to proceed, could boost domestic consumer confidence in the coming months.