For all the alarmist talk this time last year, surrounding the consequences of Brexit, the signs of the UK’s imminent demise following its decision to leave the EU aren’t showing up just yet.
It’s true that Sterling has weakened against the Euro and the US Dollar, but both Britain’s economic activity and investors’ faith in its economy remain quite resilient.
Record inflows for tech investment in London
Take for example London, England’s capital and overall economic powerhouse, responsible for nearly a quarter of the UK’s GDP. According to London & Partners (L&P), the city’s official promotional agency, London remains the top destination of choice for technology investment in Europe.
Since the Brexit vote last June, its tech sector has attracted more than double the investment than that of Berlin, its nearest competitor.
What’s more, capital inflows in the first half of 2017 came in at levels not seen for a decade. This should raise some doubts over the rhetoric put forward by supporters of the Remain camp, and the predictions that the economies of London and the UK will turn significantly weaker and progressively more isolated on the global stage.
Over the first six months of the year, private equity investment in London’s technology sector stood at £4.5 billion, with venture capital investors pouring in another £1.1 billion, the biggest on record so far.
The news was clearly welcome by Laura Citron, chief executive of L&P.
“The Brexit vote has understandably created some uncertainty, but it is no surprise to see that London continues to attract more than double the amount of investment than any other European city”, she said, adding that London has “everything companies need to be successful: policymakers, finance, infrastructure, world-class universities and talent.”
Potential for Growth outside London
The good news may not be limited to just London, however. A recent report from a separate body also painted a rosy picture about the prospects for the UK economy as a whole.
Oxford Economics, an independent global advisory firm originally formed as a commercial venture with Oxford University’s business college, forecast that the UK economy will grow 1.8 per cent per annuum over the next five years, much faster than Germany and the Eurozone as a whole, which are expected to register growth levels of 1.3 and 1.5 per cent a year, respectively.
Oxford Economics’ “Understanding County Economies” report also boldly claims that the growth of the economy would really take off if the UK were to devolve fiscal powers away from London and onto England’s county authorities.
It projects that annual growth under this scenario could reach as high as 2.7 per cent, with an extra 1 million new jobs being created, a boost of more than £26 billion to the UK’s GDP, and public sector savings of £11.7 billion per year.
“Brexit means that to improve exports and manufacturing performance, the Industrial Strategy must look beyond the largest cities”, said Richard Holt, Head of Global Cities Research for Oxford Economics.
“Local economies covered by the County Council Network account for over half of England’s manufacturing output and almost 40 per cent of exports”, he added, pointing that this is big enough to “heavily influence overall economic activity in the UK.”
Still early days
As has been seen with the predictions prior to the Brexit vote, which expected an imminent collapse of the economy and a steep rise in unemployment under the Leave scenario, economic forecasts don’t always prove accurate. That may also be the case with the more optimistic report above.
Even though it’s been three months since the UK government triggered Article 50, the formal request for separation from the EU, the actual negotiation process has only just began.
The deadline for the talks to conclude is at the end of March 2019, and this could yet be extended further if all 28 EU members agree on such an extension.
It’s therefore still early days in the process, and the balance is still delicate. Uncertainty is probably the only certainty on the road ahead, and that could obviously still negatively affect the UK economy.
The question as to whether Brexit will be a good thing or not for the UK thus remains wide open.