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Another defection to the Lib Dems and pound rebounds against the dollar

September 3, 2019 7:14 PM
Originally published by East Suffolk Liberal Democrats

Pound picks up from a slump not seen since 2016, after Tory MP defects to the Liberal Democrats. Phillip Lee (Chris McAndrew [CC BY 3.0 (https://creativecommons.org/licenses/by/3.0)])

The Liberal Democrats have gained another MP in former Tory, Philip Lee who crossed the floor of the House at the start of a critical week for parliament and the country and when fears for a no deal Brexit were forcing the currency closer to parity with the dollar and the Euro.

Why does all this matter? Well Brexiteers and many Leave supporters claim that warnings by those who wished to Remain was all Project Fear proven that post Referendum nothing has actually happened.

All the evidence to date however points to the fact that the Brexit vote has taken a toll not only on the currency but on businesses even before Britain leaves the EU. Trump's trade wars and a global economic downturn have certainly weighed on the UK underlining the need for prudence and economic stability, however the self inflicted harm being done to our home economy and business is already clear for all who wish to see. The potential short and long term negative impact of Brexit on ordinary people is also becoming clearer by the day and those who wish us to take a giant leap in the dark need to take a long hard look at themselves and ask 'is this really what we voted to do'?

Whilst Brexiteers applaud the pound's drop in value adding that it offers the UK a trade advantage, the fact the the pound has lost an estimated 10% of its value since the 2016 Referendum seems to be of little concern as ordinary families can look forward to higher prices as a result of shortages, inflation and the imposition of tariffs, lower productivity as a result of supply chain delays and falling investment and uncertainty in the labour market as companies reassess their future in the UK and the country shuts the door on free movement of labour from our nearest neighbours.

It is estimated that the Government which is ploughing billions into No Deal Brexit planning has already incurred £70 bn in costs and losses so far, with £1.1 trillion in assets transferred out of the country, Thousands of EU nationals have chosen to take their valued and skilled labour out of public services and businesses, causing numerous firms to leave the country, move out their tax base, de-invest and export thousands of jobs, while causing millions of people to feel insecure.

The UK's manufacturing sector contracted at the fastest pace for seven years in August, a survey has suggested.

According to Reuters News, uncertainty surrounding Brexit and the global economic downturn were some of the factors hitting firms, according to the survey from IHS Markit/CIPS.

The purchasing managers' index (PMI) produced by IHS Markit/CIPS fell to 47.4 in August, down from 48 in July. (A figure below 50 indicates the sector is contracting). New orders fell at the fastest pace for seven years, and business confidence fell to its lowest level since the survey first began to track the measure in 2012.

Rob Dobson, director at IHS Markit, said "The global economic slowdown was the main factor weighing on new work received from Europe, the USA and Asia and a further impact from some EU-based clients routing supply chains away from the UK due to Brexit."

The UK economy, world's fifth largest has shrunk by 0.2% in the second quarter of the year - the first time it has shrunk since 2012.

If the economy contracts in the current July-to-September period, two quarters in a row the UK will be in recession.

Mr Dobson said the PMI survey's results suggested the manufacturing sector - which accounts for about 20% of the UK's economy - was contracting at a quarterly pace of "close to 2%".

Brexit planning has cut productivity of UK firms say the Bank of England

(Reuters also report that the Brexit process has cut the productivity of British companies by between 2% and 5% since the 2016 vote to leave the European Union, according to a research paper published by the Bank of England a week ago.

Most of the shortfall reflects a drop in productivity within businesses as senior managers commit several hours per week to planning for Brexit, the researchers said. "Based on an analysis of the BoE's Decision Makers' Panel survey of executives, the research showed the anticipation of Brexit had reduced business investment by around 11% over the last three years.

Official data show business investment in Britain has flatlined over the last few years, ending a rising trend that took place from the aftermath of the financial crisis through to 2015.

The paper was authored by economists Nicholas Bloom and Scarlet Chen of Stanford University, Bank of England economists Philip Bunn and Pawel Smietanka, Paul Mizen of the University of Nottingham, and Gregory Thwaites of the LSE Centre for Macroeconomics.

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