Last week marked the 2-year anniversary since the UK voted to leave the European Union in the referendum vote. Whilst the economic impact of Brexit on the UK has been widely debated, the UK has been one of the slowest growing developed economies in the 2 years since the vote, and UK households are now worse off than prior to the vote. Inflation hit a high over 3% during 2017 as sterling fell, increasing the costs of imports. Whilst sterling reached is pre-Brexit level in April of this year, sterling continues to fluctuate with the uncertainty surrounding the Bank of England (BoE) and base rate expectations.
The UK government is also yet to decide on much of the details of leaving the European Union, with no deal on trade or the Ireland border yet agreed. However, the week ahead sees an EU summit, with a session from the European Council to discuss the progress towards a Brexit deal. Whilst no deal has yet been agreed so no details on the funding, Theresa May has announced that the NHS is due to receive an extra £20bn a year by 2023, which would be partially funded by a ‘Brexit dividend’.
Last week, the Bank of England once again voted to keep interest rates at their current level of 0.5%. As economic data continues to disappoint, the members of the Monetary Policy Committee voted 6 to 3 to keep rates as they are. However, there is increased expectations that rates will be raised in August as this is the first time since 2011 that Andy Haldane, the BoE’s chief economist, has voted against the majority.
As tensions between the US and China continue to rise towards a trade war, Asian indices have fallen, with Chinese stocks in Shanghai and Hong Kong the worst affected. As well as trade tariffs, the US has decided to limit the investment from China in US companies as the Trump administration continues to aggravate the Far Eastern country.
