The UK Prime Minister has been warned that her government only has 6 months to secure a transition deal or start to rapidly lose jobs to the EU. Sir Howard Davies, chairman of RBS said that companies, including his own, would start the process of moving jobs, warning ‘If there are no details by the first quarter of next year, the number of moves of people out of London will accelerate’. The warnings come on the back of what is looking like a failed attempt by some senior Tories to oust May. There are now reports that May will reshuffle her cabinet after meeting European leaders Oct. 19-20; with the possible big loser in the reshuffle being Boris Johnson.
This comes off the back of economic figures that are looking increasingly fragile in the UK. As the global economy continues to grow, even at a lacklustre pace, with the help of sterling, UK exports have remained strong. However, this may be just papering over the cracks, as the UK growth has moved from a leader, to an also ran. Last month consumer spending fell 0.3%, with worrying signs that consumer spending through spare cash, on things such as recreation, dropping the most since July 2013. Added to this you have the housing market, always a gauge, rightly or wrongly, as to the wellbeing of the nation. In London, the housing market has at best been treading water, central London has actually fallen, with market data service Hometrack saying that the London property market is at its slowest in eight years. If this trend is to follow through nationally, and spending on nonessential items is to fall, the economy will look in an increasingly precarious shape.
The signs may have already stated, with new car sales falling across the UK for the sixth month in a row in September, down by 9.3% on the same month last year. It is the first time the key September market has fallen in six years. Although some of the fall can be attributed to concern over diesels and air quality plans, as Mike Hawes, chief executive of Society of Motor Manufacturers and Traders (SMMT) states, ‘September is always a barometer of the health of the UK new car market so this decline will cause considerable concern’ adding, ‘Business and political uncertainty is reducing buyer confidence, with consumers and businesses more likely to delay big ticket purchases.’
Another worrying sign for the UK is the rise in household debt in these uncertain times with the poorest most exposed to any financial shocks. This debt mountain is leaving households dangerously exposed according to the ratings agency Moody’s. Households have cut back on saving to fund spending, and so have less of a cushion. As Moody’s Greg Davies explained, ‘household debt is high and still growing, leaving consumers vulnerable to an economic downturn’, adding, ‘We expect that a slowdown in GDP growth - and a resultant decrease in consumer confidence - combined with a slower rate of buy-to-let lending will cause a decrease in house prices.’