In the 16 months since the referendum that set Brexit in motion, the British economy has weakened in the face of a confounding array of uncertainties. Thrift is the order of the day, along with worries about multinational companies’ paring their investments in Britain.
Last week, the picture appeared to brighten, as official data showed the economy had expanded a tad more than expected between July and September. The growth of 0.4 percent for the quarter, which bested expectations of 0.3 percent, reinforced the market’s assumptions that the Bank of England will lift rates when it convenes on Thursday, using a presumably stronger economy as the impetus.
But some economists fear such a move is premature given Britain’s fragile state. Many focused on plunging retail and car sales as a harbinger of trouble.
The drop in the pound has lifted prices on goods ranging from Italian olive oil to Chinese-made electronics. The rate of inflation reached 3 percent in September, the fastest pace in five years. Consumer spending has dipped over the past year while consumer credit is rising — a combination that often ends badly.
The Brexit referendum prompted negotiations through which Britain and a jilted Europe are supposed to hash out their future dealings. But the talks have proved acrimonious and largely futile. This has heightened concerns that a two-year deadline on negotiations could pass without a deal, subjecting companies that trade across the English Channel with unsettling ambiguities about future rules. The Bank of England has been warning banks to prepare for that very eventuality as one possible outcome.
