Are we too pessimistic about Brexit and the country’s economy?

Are we too pessimistic about Brexit and the country’s economy?

Is Brexit really as big of a risk as some would like us to think? Or are we making it out to be something worse than it actually is? City A.M asked to of the country’s most knowledgeable economists. Let’s see what they think.

Gerard Lyons, co-chair at Economists for Brexit, says YES.

According to Lyons, the country’s biggest challenge is fighting the constant need to talk about circumstances as a downturn. Internationally, people are constantly being spoonfed negative comments from Britain’s economists and politicians, not even considering the fact that they were wrong before the referendum.

“Despite this, many global firms are seeing through this, and with sterling cheap, are choosing to invest here. They are right to do so. Brexit is a great opportunity to reposition the UK, driven by a free trade agenda and a bespoke UK-EU deal.”

This doesn’t mean that if the economy experiences a slowdown next year, Brexit isn’t automatically bad for us. The reality is far from it. Considering we’ve experienced seven years of growth, it’s fairly normal for the UK to experience some stagnation. A temporary rise in inflation in the new year may squeeze the spending power, leading to a slowdown in growth. But only for a short while.

And President-elect, Donald Trump, and his fiscal boost and central banks’ polices should give another helping hand to “reflate the world economy.”

UK growth may resemble a Nike swoosh, as the further ahead one projects, the better our economy’s prospects appear.”

Nina Skero, managing economist at the Centre for Economics and Business Research, says NO.

While data recently pointed towards a stable picture of the country’s economy, a shift might not be too far off.

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“October inflation data showed input prices increasing at the fastest rate on record. As businesses pass higher costs onto consumers, we expect inflation to stand around 2.4 per cent in 2017-18 – more than three times its 2016 level. Combined with modest earnings growth, this will squeeze household spending power.”

Focusing on business, the medium-term outlook doesn’t appear to be heaps better. Whilst business investment grew in the third quarter, firms may become more cautious in the near future with their spending.

“Although there are reasons for cautious optimism, such as the weak pound which may discourage importing (though it won’t necessarily boost the UK’s largely price-inelastic exports), the short-term risks are certainly on the downside, with most potential post-Brexit benefits such as reduced regulation years away.”

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