UK: Pessimistic growth forecasts – Westpac

The UK Chancellor’s supposedly upbeat update on the economy and public finances laid out rather pessimistic growth forecasts due to the uncertainties and costs of Brexit, explains Tim Riddell, Research Analyst at Westpac.

Key Quotes

“The details of payments into EU during the transition period and the costs of supporting impacted sectors immediately after mean that cost to the Treasury remain relatively constant yet also involve a settlement cost of some GBP38bn. An early transition agreement may lift prospects (EU Leaders’ summit on 22nd-23rd), but resolution of the Irish border and EU access for UK’s service sector (80% of GDP) remain unclear. The Treasury’s forecast of growth is therefore a sobering “facing the facts” as negotiations enter a critical stage.”

“CPI and employment data are of interest, but Brexit continues to weigh on confidence into BoE’s MPC and EU Leaders’ summit.”

“Further faltering of GBP/USD at 1.40 could lead to retracements of gains since Q4 17.”