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.
A tumultuous week for the pound. And there could be more to come. Sterling, at the time of writing, is below $1.24 – down from $1.29 last weekend. The markets are properly spooked.
This latest currency fall was sparked early last week, when Prime Minister Theresa May signaled her preference for “hard Brexit”. But then the pound plunged more. Friday’s “flash crash” – which saw sterling touch $1.18, before recovering – followed warnings from French President Hollande that Britain would “pay” for leaving the European Union. That apparently triggered a wave of automatic, computerized sell-offs.
International commerce is stalling. The growth in exports of goods and services is this year set to fall below the overall expansion of global GDP for the first time in 15 years. Myopic politicians, ignoring the lessons of history, are succumbing to the siren calls of protectionism. The world economy is becoming more insular.
The World Trade Organization, the most important trade body on earth, just slashed its 2016 forecast for the increase in total international commerce from 2.8pc to 1.7pc – well short of its 2.2pc estimate for the growth of the world economy as a whole.
‘There was never a consensus among economists that Britain should stay in the European Union,’ insists Professor Patrick Minford. ‘That was always rubbish.’
During the heat of the referendum campaign, Chancellor George Osborne asserted it was ‘economically illiterate’ to back Leave. ‘It’s Osborne himself who is economically illiterate,’ Minford shot back.