It’s been a busy summer. A referendum, a change of Prime Minister, the Olympics, English football humiliation and now the end of Brangelina. Can 2016 get any 2016-ier?
“Brexit means Brexit”, our new Prime Minister Theresa May keeps telling us, using a phrase as memorable as it is nonsensical. Brexit doesn’t mean anything – yet. Several months on from the UK’s decision to leave the European Union, we are no closer to understanding what our relationship with Europe will be after the withdrawal is finished or the form of negotiations after Article 50 is triggered (probably early 2017, potentially later, possibly never).
Writing in the Financial Times this week, Martin Wolf does as much as anyone has to outline a realistic scenario for the UK:
‘[I]t seems overwhelmingly likely that the outcome will be “hard Brexit”… a departure not only from the EU but also from the customs union and the single market.’
Huge question marks remain not only over these issues – central pillars of the political and economic relationship with the EU – but also over the free movement of individuals (in both directions) and the implications for both British businesses and non-European business headquartered in London. Will it cost UK citizens money to travel to Europe? Will the rights of current EU migrants in the UK be safeguarded? Are we still in Eurovision? No one knows the answer to any of these questions. Meanwhile, politicians and commentators debate the constitutional process. Parliament could yet have a say, the people could yet have another say, and Scotland could yet leave one union to avoid leaving the other.
All this is enough to keep business leaders, Whitehall mandarins and politicians in headaches for several years. But the public are seemingly unconcerned – after an initial panic in July, when consumer confidence (as measured by GfK) fell to -12 (its lowest level since 2013), the signs have been positive. Over the summer the UK has seen rises in retail spending, and unemployment remains low. In August, consumer confidence rebounded.
Does this mean that you can leave the Anderson Shelter you hastily built on the 24th June? Yes. Does it mean that fears about Brexit were misplaced? Not necessarily. Brexit will struggle to have any corporeal impacts until it actually happens. The current situation is one eerily reminiscent of the period between the run on Northern Rock in September 2007 and the collapse of Lehman Brothers a year later. Between the two, the UK economy officially entered recession – but before this, consumer confidence and spending remained steady, declining only as the economy faltered in early 2008.
We find ourselves in a similar phoney war. Consumers now, as then, are aware of the possibility – if not the likelihood – of a big economic event on the horizon but are yet to see an urgent need to modify their spending habits in the short term. Whatever form it eventually takes, the UK’s withdrawal from the European Union may cause significant economic repercussions – or it may not.
Until then, consumers may choose to be more concerned by Brexpitt than Brexit.