On Tuesday 19 February, Bank of England NI Deputy Agent Gillian Anderson gave an update on the economic outlook based on the Bank of England’s Latest Inflation Report.
Some of the key points that were highlighted were:
Generally, businesses in the UK and Northern Ireland are not prepared for a no-deal Brexit.
Business investment was rising after the 2008 recession, but when the Referendum act was passed, it plateaued. Historically, by this stage after a recession, investment should be much higher, but the uncertainty of Brexit has caused it to slow.
Most businesses think both output and employment will be affected negatively by a no-deal outcome.
There has been a recent dip in consumer spending recently and it is projected it will be weak over 2019.
The Monetary Policy Committee (MPC) target for inflation is 2%, the most recent figures had it at 1.8% (this was due to falling oil and gas prices).
It is expected that inflation will remain below target but will grow throughout 2019.
In the immediate term, economic growth is likely to be weak.
All of the economic data is expected to be very volatile and so there is no certainty about what will happen in the immediate, short and medium term.
A stress test was recently carried out on the UK banking system to replicate the impact of a no-deal Brexit and the indication is that the system could survive a no-deal Brexit.
Employment growth has remained strong, however many businesses have indicated that Brexit will have a negative impact on employment. The strength in the labour market is likely to be a delayed reaction feeding through the economy.
Global economic growth has slowed which has filtered through to the UK economy an exports have fallen.
All of the Bank’s projections are based on a smooth transition in Brexit so the level of uncertainty is incredibly high.
The key issue that was highlighted, was that uncertainty around Brexit meant that all economic data is extremely volatile, so making economic predictions is very difficult.