Britain will be among the fastest-growing economies in the industrialized world this year, according to the International Monetary Fund. With the UK set to expand by 2pc in 2017, outstripping Germany, France, Japan and second only to the United States, the IMF last week became the latest in a long line of official forecasters to ditch predictions of British economic woe after last summer’s Brexit vote.
It wasn’t the IMF, though, that caused the pound to rally last week – even if its UK growth forecast was sharply increased from 1.5pc, with Britain getting the biggest upgrade of any major economy. Sterling surged by 4pc against the dollar last Tuesday, hitting a six-and-half month high, because of a snap election.
For decades, across much of the UK, far too few homes have been built. The average house now costs almost eight times annual earnings – an all-time record. In London and the South-East, of course, this ratio is even higher.
Much of “generation rent” is simply unable to buy a home. For millions of youngsters, even those with professional qualifications and good jobs, property-ownership is an ever more distant dream. Ten years ago, 64pc of 25- to 34-year olds, the crucial family-forming age group, owned their own home. In 2015, it was 39pc.
Caution is warranted,” said Gertjan Vlieghe last week, as he argued now isn’t the time to raise interest rates. I’d say Vlieghe, a member of the Bank of England’s Monetary Policy Committee, should reconsider.
The UK is heading for a downturn, believes the half-Belgian economist, as the fall in sterling after last summer’s Brexit vote pushes up inflation, so squeezing household finances. “The consumer slowdown, which initially didn’t materialize, now appears to be under way,” said Vlieghe during a speech in London, arguing rates should stay put at an ultra-low 0.25pc.
“After nine months on the launch pad,” wrote Boris Johnson in the Telegraph earlier this week, “Britain has finally engaged the most famous ignition sequence in diplomatic history”.
The Foreign Secretary was referring, of course, to Theresa May’s triggering last Wednesday of Article 50. The UK now has two years to agree the terms under which it will leave the EU, while trying to determine the nature of our future relationship with the remaining 27 member states.
What are grown-up investors to make of relations between Russia and the West? The rhetoric emanating from politicians and media commentators, in the US and UK at least, seems to be drawn from another era. Mainstream British and American newspapers are full of coverage about the Kremlin’s connections to US President Donald Trump, Secretary of State Rex Tillerson and Trump’s former National Security Advisor Michael Flynn. Some headlines go into full Cold War retro mode, talking of spy swaps and “Soviet agents”.
Russia’s official media has, typically, responded in spades. Against the background of the Ukraine crisis and related sanctions, accusations of “Kremlin meddling” in the US election have been met with more, even harsher, anti-Western rhetoric from Moscow. Such spiralling paranoia makes it seem like we’re through a bizarre re-run of the halcyon days of McCarthyism and Mutually Assured Destruction.
What should we make of this latest rise in UK inflation? Is it because of Brexit? And are interest rates now set to rise for the first time in almost a decade?
This was a sharp inflation increase. In February, the consumer price index was 2.3pc higher than in the same month in 2016, compared to a 1.8pc annual increase the month before. Less than six months ago, in October 2016, annual CPI inflation was remarkably subdued, at 0.9pc. Now UK inflation has shot above the Bank of England’s 2pc target for the first time since 2013.
“Britain’s example will make everyone realize it’s not worth leaving,” says European Commission President Jean-Claude Juncker. The President of the European Commission, on hearing the UK will trigger Article 50 on Thursday week, demanded a £50bn “divorce payment”.
So what if the UK has made some of the largest financial contributions of any member state? Since 2000 alone, we’ve paid £90bn more to the European Union than we got back.