The general election results of 12 December 2019 have come with a dash of hope for the British Economy. The country which has been battered for a few years due to the uncertainty surrounding Brexit has now heaved a sigh of relief. The win of Prime Minister Boris Johnson in these elections means that he now has enough mandate to push through his proposals for a planned Brexit withdrawal. Before the elections, he has worked out a draft Brexit deal with European Union officials but couldn’t pass it through the British parliament then due to lack of mandate. This new Brexit deal thus will alleviate a lot of anxiety and fear among British businesses who had been worried about an uncertain future for some time. Since that date, several leading economic indicators have started to look up, pointing towards a revival of the British economy.
The consumer confidence in the United Kingdom has increased in the month of December 2019 as compared to the previous month of November 2019. This is as per the country’s long-running Consumer Confidence Index maintained by GFK (Growth from Knowledge) which recorded -11 point in the index in December 2019 against -14 point on the index recorded in the month of November 2019. Joe Staton, the Client Strategy Director at GFK, while commenting on the development said that the improvement in the index figures clearly states that there has been an increase in confidence levels during the month of December. He also stated that the improvement in the index for the month of December demonstrates a robust increase in people’s confidence in their economic future, levels that have not been witnessed since the summer of 2016. This information, however, comes amidst the official warning that the British economy may be flat-lining. More importantly, what needs to be taken note of here is that despite the record high employment figures and below target levels of Inflation, the index has not been able to break into the positive territory. The index, which comprises of five constituent measures, had recorded a growth in four of those measures with a fall in one measure, leasing to an overall increase in the index value.
Optimistic data also came from the REC’s permanent staff placement index maintained by the Recruitment and Employment Confederation (REC), the trade body of recruitment firms in the United Kingdom. The survey, conducted by the trade body during the first two weeks of December 2019, indicated that employers across the United Kingdom for the first time in a year have started to recruit more permanent employees. The index for the month of December jumped 6.35 per cent form 48.8 recorded in November 2019 to 51.9 in December 2019. The index, which draws a line at 50 between contraction in recruitment and expansion in recruitment, witnessed its value in the above 50 category for the first time since February 2019. The improvement in this index is a sign that the British industry is now more optimistic about the economy and is willing to expand business activities after the last few years of economic turmoil. There are, however, a few riders in this index value observed during the month. First, the survey was conducted between 5 December 2019 and 17 December 2019, with the General election day falling in between. Second, it was the new tax regulation that would make the hiring of temporary employees more expensive compared to permanent employees, which could be triggering this sudden hiring spree.
Good news also came from the housing sector of the economy in the month of December 2019. As per the data provided by the Nationwide Housebuilding Society of the United Kingdom, the prices of houses in the country rose by an average of 1.4 per cent in the month of December 2019 in comparison to the beginning of the year. This was despite the fact that property prices in London, the most premium market in the United Kingdom, witnessed a fall in prices of 1.8 per cent in the fourth Quarter of 2019. The Scotland market was the best performer during the quarter, witnessing a price growth of 2.8 per cent followed by West midlands which registered a growth in prices of 2.7 per cent. Similar conclusions were also drawn by the IHS Markit owned Halifax House Price Index which runs and maintains United Kingdom’s oldest running house price index. The index series, which is based on mortgage transaction data of the United Kingdom, has been maintained since 1983 and recorded the most growth in December 2019 in monthly terms than that had been recorded in nearly 13 years. On a monthly basis, the growth in the price index was 1.7 per cent in December 2019 over November 2019 whereas on a year- over- year basis the growth in the price index was 4 per cent, the highest to be recorded since February 2018.
In the past couple of years, the British economy has been through turmoil. The decision of the United Kingdom to leave the European Union was about a phase of instability in the British economy. The uncertainty of how the British economy will shape up in future made businesses countrywide withhold their expansion decisions, which resulted in the economic slowdown. This was further aggravated by the fall in confidence levels of the British consumers who were now more apprehensive about their future and also started to curtail their spending. The combined effect of the above was that the investment climate in the country also took a serious beating. From the Brexit referendum in 2016 till the general elections of December 2019, several economic indicators had taken a southward plunge. Towards the middle of 2019, it seemed that the British economy would slip into a longer-term recession in the absence of a quick decision on the Brexit deal. However, the passage of the Benn Act and the postponement of the tentative Brexit date to 31 January 2020 brought about a significant amount of clarity on the way Brexit was going to be executed.
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