Underlying Economic Data Encouraging

Recent economic data appear to defy the problems of Brexit uncertainty. Tax receipts now cover day to day spending for the first time since 2002. Employment levels are at an all time high in the UK. Consumer demand remains fairly resilient. Wages are now rising faster than inflation, though this by no means applies to everybody. On the other hand, business investment is down, and productivity remains weak.

Here in Yorkshire figures from the Yorkshire and Humber Business Activity Index registered 52 in March, which indicates an increase in business activity. This was ahead of the UK wide figure of 50.

There are several reasons why these figures should give us cause for optimism.

We have endured years of public sector austerity, but if the government’s finances have improved sufficiently, the government may now be in a position to allow the public sector to play a greater part in increasing economic activity. There is certainly considerable pent up demand.

The fact that we now have almost full employment and that wage rises are currently outstripping inflation indicates that consumer demand should remain resilient. A word of caution here, however, is that if inflation creeps up the Bank of England may be required to raise interest rates.

Business investment is probably in the doldrums due to Brexit uncertainty. This could have a significant impact on future prosperity. At the moment it is far from clear what effects this lack of investment will have, nor whether it is only temporary and whether or not we might see a recovery when Brexit is finally resolved. If the lack of investment is only temporary, then we could see a splurge once things become clearer.

It is especially encouraging to see Yorkshire exceeding the UK trend for once though we should not get carried away as our overall base is much lower than the UK average but any form of catch up is good news.

So, overall the underlying economic picture looks promising. Then we have Brexit. A favourable outcome, whatever that is, might provide us with a bounce. An unfavourable outcome or more uncertainty could create real problems and could undermine all the good work that our business people and workforce are doing. The sooner this exercise is brought to a successful conclusion, the better.

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