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Despite Brexit Detractors, Signs of Strength in Britain’s Economy

Leaders of the pro-Remain parties in Northern Ireland -- Colm Eastwood from the Social Democratic and Labour Party, from left, Michelle O'Neill from Sinn Fein, Steven Agnew from the Green Party and Naomi Long from the Alliance Party -- hold a joint press conference May 22, 2018. (Niall Carson/PA Wire"

Sometimes when you look at the facts, they just don’t jibe with the commentary from the chattering classes.

Take, for instance, the UK economy. The stock market recently hit a record, the same for investment, and unemployment is at a 42-year low. While that wouldn’t sound too shabby to most people, it does to some folks.

They are the so-called “re-moaners,” the people who moan about the need for the country to remain in the European Union. They’ve been talking about the matter with barely a moment to draw breath since even before the referendum vote back on June 23, 2016. The problem is that their warnings have so far not matched the economic facts, which show the UK economy going from good to better to (in some cases) best-ever.

Consider the following examples.

On June 20, 2016, financier George Soros wrote for the Guardian: “My 60 years of experience tells me the pound will plummet, along with your living standards. The only winners will be speculators.”

The day after the June 23, 2016, vote, the Telegraph newspaper reported the following tweet from Richard Branson, founder of the Virgin Group, calling Brexit “a very sad decision that will do huge damage to Britain’s prosperity & Europe’s stability.”

On June 28, 2016, former chairman of the Federal Reserve Ben Bernanke wrote the following for the Brookings Institution, a Washington D.C.-based think tank: “Even more obvious now than before the vote is that the biggest losers, economically speaking, will be the British themselves.”

Neither has time made the negative Brexit sentiments dissipate.

Late last year, The Independent newspaper continued in the same vein with the following line: “The UK is expected to have lost 10,500 finance jobs by day one of Brexit, according to professional services firm EY.”

Let’s deal with the last comment first. Finance jobs get lost every day, everywhere in the world. Go back to the late 1980s, and you’ll find that the introduction of the fax machine eliminated loads of jobs for telex operators. More recently, we learned earlier this month that the German financial firm Deutsche Bank (DB) would cut around 7,000 jobs, or one-in-10 worldwide. Many will no doubt be in London.

These things happen. But it is hard, in most instances, to point to a distinct geopolitical event as the cause. In the case of DB, it seems more likely to be specific to that institution. The telex operators got hit by technological innovation. Trying to clip together the events and the causality is tricky, especially in this case, because the financial industry job losses coincide with gains in the British economy, which keeps getting better.

Unemployment is now at 4.2 percent, the lowest level in more than four decades, according to data collated by TradingEconomics.com. GDP per capita is at $41,600, its highest level ever, according to the same source. These are positive metrics that deal with the current state of the UK economy. But other forward-looking metrics paint an even rosier picture.

Britain’s stock market has surged these past two years. The FTSE 100 share index (roughly equivalent to the S&P 500) reached an all-time high in May and is up more than 24 percent in the last two years, according to data from Yahoo. Investors don’t buy stocks based on what is happening now. They look into the future. Although stock prices go up and down all the time, they tend to get bid progressively higher when there are expectations that future earnings of companies will increase. That’s what has happened in this case. Stock investors are betting that Britain will do better, not worse.

Likewise, investment in physical assets like factories and machines has done well. What economists call “gross fixed capital formation,” which measures the increase in the stock of physical assets, is now at its highest level ever, again according to data collated by TradingEconomics. This is a sign of optimism. Business people don’t build new factories or buy new machinery when they don’t think there is a great economic future. That’s just plain simple business.

Could Britain’s economy be stronger? Yes. Growth, at 0.1 percent in the latest quarter, has been sluggish, according to TradingEconomics. That is disappointing. What is to blame? One possibility is that it could be the lack of progress on getting a new trade deal going to start when the country leaves the EU.

But the reason for the slow growth could equally be the fact that the re-moaners keep talking down the British economy by continually warning of imminent disaster. Such scaremongering takes a toll. Maybe without all the moaning, Britain’s economy would be doing even better. Perhaps it is time for everyone to stop complaining.