Concerns initially formed around the currency crash and a dive in stock prices. While they were sharp and concerning, many pointed out that it was not unexpected. However, as the fallout continued, there were fresh concerns that productivity in the economy would slow, or even reverse, and construction would stagnate.
These fears were accelerated when, in early July, four property funds stopped withdrawals as panic set in across the commercial property sector. The glum predictions claimed vindication and further underwhelming news was released for housebuilding figures.
However, three weeks of economic performance after the biggest vote in a generation in the UK is nowhere near long enough to make a proper and informed review of the situation post-Brexit. Perhaps a symptom of instant news consumption and 24-hour rolling news headlines, the appetite for instant predictions and analysis has muddied the waters somewhat in the reviews of the decision.
With the benefit of hindsight it is now possible to make an honest assessment as positive news is emerging after the dust has settled. It has been revealed that economists at major City investment banks have cancelled forecasts of a Brexit-inspired recession with fresh data showing the economy performing more robustly than expected. Britain’s trade deficit narrowed significantly in July, as exports increased by £800m to £28.4bn, while imports fell by £300m to £36.6bn. Construction output was also steady in July, faring better than expected a month after the Brexit vote. Goldman Sachs, Morgan Stanley and Credit Suisse are among the major banks that have now withdrawn earlier predictions that Britain is likely to enter recession.
Further to this, as the pound tumbled following the Brexit vote, goods exports from the UK to other countries rose 3.4% between June and July. Exports to the EU, made cheaper by the pound’s decline, rose 9.1%, according to official figures. It was the biggest rise in EU exports since October 2010. In a separate release, the Office for National Statistics (ONS) said construction output stabilised in July, defying expectations among economists for another drop. Construction companies also enjoyed the biggest pick-up in orders for three years in the three months leading up to the referendum.
The final good news to support the idea that the economy is outperforming expectations is that house prices have continued to rise despite the Brexit uncertainty. The property market as a whole has held up well with prices rising and yields staying strong for landlords and investors. Construction on residential housing has had a slow recovery but private construction for off-plan investment has been steaming ahead thanks to high demand. Capital appreciation on off-plan developments has also held strong despite initial fears.
Nobody can say for certain what the future holds but based on a more detailed analysis of the bigger picture it would seem the UK economy is much more resilient than initially predicted.