Brexit now seems to be on the back burner, and it is unclear when, how and even if it will happen, three years after the vote to leave the EU. Naturally, this uncertainty has influenced the economy – but as we have come to expect, effects caused by Brexit tend to be anything but predictable.
In fact, April saw some parts of the economy experience a slowdown, while others received a boost. We look at the winners and the losers – and try to see the overall picture.
Bad news on the high street
Retailers seem to have had a miserable April, even though warm weather and the Easter holidays should have encouraged shopping. Sales were down according to a survey by business advisory firm BDO. Their monthly High Street Sales Tracker found sales in UK shops fell in the third monthly decline for in-store sales so far this year.
However, data published by the Confederation of British Industry showed that retail sales rose for the first time in five months in April. This might suggest that overall sales, which include online sales are healthy. The drop in the high street might not reflect customers fearful of Brexit, but a greater enthusiasm for dodging the crowds and shopping online.
Services – looking up
The UK’s services industry, which covers everything from global banks and advertising agencies to hairdressers had been contracting in the run-up to the original Brexit deadline in March. Perhaps buoyed by the possibility that the banks will not need to move to Frankfurt after all, the sector showed a small but significant recovery in April.
Industry – treading water?
The phenomenon of Brexit stockpiling had given a boost to the industrial sector in the run-up to the old Brexit date. The postponement of Brexit removed the need to fill the warehouses with things that might be in short supply after we leave the EU. The PMI (Purchase Manager Index) figures showed this boom faded in April.
New orders in March and April together marked the weakest two months for British services firms in more than six years.
Forward-looking indicators such as order books and backlogs hint at a near-term reduction in demand – although reduction from a boom could be argued to equate to a healthy return to normality.
Construction – growing
The construction sector returned to growth last month. This was due to a pick-up in housebuilding, although industry observers suggest that the outlook is less certain due to a sharp fall in new orders.
There is a long lag between market sentiments and construction – work is planned months or even years before it starts.
The construction Purchasing Managers’ Index rose to a three-month high in April. Better than forecast quarterly figures from the National House-Building Council showed a 3% annual rise in housing starts for the first quarter. However, there may still be weakness outside house building; cautious corporate customers are not building extra manufacturing, retailing or office facilities.
It looks as though hitting the pause button on Brexit has slowed some sectors and not others. These ups and downs have been reflected by the FTSE, which hit a six-month high of 7,523.07 in April – although still a little down from the dizzying all time high of 7877.45 in May last year.
There is a new Brexit deadline of 31st October. Politicians are hard at work debating how exactly this will take place, and until they do, it is likely that the position will remain mixed.
However, although no clear overall trend is obvious, the underlying picture is actually one of growth. Last week, the Bank of England lifted its growth forecasts for Britain’s economy over the next three years. BoE Governor Mark Carney said measures such as the PMIs might overstate the effect of Brexit uncertainty.
What will this mean for your own financial plans? It is probably too early to see the long-term direction for the UK economy, but if you would like to improve your own financial outlook whatever is happening to the wider world, you might want to get some expert help. Simply call us at Continuum to get it.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
uk.reuters.com – UK services firms return to growth in April, but only just – 3rd May 2019
uk.reuters.com – British shop sales fall in April, BDO survey shows – 3rd May 2019
uk.reuters.com – Housebuilding returns UK construction sector to growth in April – 2nd May 2019
tradingeconomics.com – UK FTSE 100 Stock Market Index