A former senior Bank of England policymaker has warned that British economy is trapped in “no-man's land” by Brexit and the next decade could be the weakest for growth since the second world war. Andrew Sentance, a former member of the central bank's interest rate-setting monetary policy committee (MPC) said, “The UK economy will be limping on for a while, until Brexit negotiations are fully resolved. I can see the UK being in this limbo-land for quite a while, certainly until the late 2020s.” The warning came as UK showed robust growth at the start of the year, fueled by a dramatic rise in stockpiling before the original Brexit date of March 29, now postponed until the end of October.
Sending sterling tumbling on the foreign exchanges over the past month, observers now fear that Brexit has been transformed from its previous status as a time-limited process into a structural feature of the UK economy, with the prospect complex and protracted negotiations dragging on growth for years to come. Business activity has kicked into reverse amid a lack of new work for firms to replace completed projects, as companies put decisions on hold owing to the lack of clarity over Brexit. Manufacturers have, however, been bolstered by stockpiling to the most intense levels on record of any G7 economy, perversely fueling higher GDP growth despite the malaise.
The UK posted record monthly goods trade deficits in both January and February as business rushed to buy raw materials, components and merchandise from overseas before the previous March 29 deadline in the Brexit talks. Economists fear the stampede to protect against disruptive no-deal scenario could lead to sluggish economic growth in future as firms run-down their supplies.
The economy grew by 1.4 per cent in 2018. Against this backdrop, and after Theresa May delayed the Brexit process earlier in the month, the Bank of England is widely expected to keep interest rates on hold when it releases the decision of the MPC and its quarterly inflation report later this week. Unemployment remained at the lowest level since the mid-1970s, in a sign that Brexit has not deterred employers from hiring staff. However, economists believe that firms have out off spending on technology and hired workers to meet demand instead.
Latest figures for productivity, a measure of economic output per hour of work, which is key for driving up living standards over the long term, showed that Britain's efficiency gains slowed in 2018.