Judged by what is happening in the rest of Europe, Britain’s economic performance in late 2018 was reasonably good. France was paralysed by the gilets jaunes protests, while Germany and Italy flirted with recession. The UK is likely to have grown by 0.3% in the final three months of 2018, and by contrast with the other major European economies that’s not too shabby.
Look beneath the bonnet of the economy, though, and things don’t look quite so good. It is not really that growth halved between the third and fourth quarters, because activity was unusually high in the summer and early autumn as a result of the World Cup, a heatwave and a bounce back from the weather-related hit to growth earlier in the year.
The real problem is that growth is both modest and unbalanced. Manufacturing is struggling, with November seeing the fifth month of falling output. The trade deficit is widening, which is truly depressing given that the sharp fall in the exchange rate since the EU referendum in June 2016 should have provided a fillip to exports. The monthly growth rate picked up between October and November, but only because consumers snapped up bargains on Black Friday and Cyber Monday. Such growth as there is is heavily reliant on the willingness of consumers to spend.
Brexit uncertainty is clearly affecting the economy and will continue to do so in the first quarter of 2019 – and perhaps beyond if the Article 50 process is extended beyond 29 March. Investment has been put on hold and consumers are spending less than they otherwise would. But not a lot changes as far as the economy is concerned and it is a fantasy to imagine that all will be well once the UK’s future relationship with the EU is resolved.