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This week’s roundup covers gloomy economic forecasts relating to Brexit, unexpected recent growth in the UK economy, a surprise jump in consumer confidence and falling mortgage approvals.

UK economy ‘will be worse off after Brexit, no matter what’

Britain’s economy will take a hit after Brexit in every possible scenario, a leaked government document has suggested.

BuzzFeed News reported yesterday (29th January) that it has seen a new Brexit impact assessment document that examined the three most plausible Brexit scenarios and their expected impact on the economy.

According to the news source, the document - titled ‘EU Exit Analysis - Cross Whitehall Briefing’ - states that under a comprehensive free trade agreement with the EU, UK growth would be 5% lower across the next 15 years than current forecasts predict.

A ‘no deal’ scenario would reduce growth by 8% over the same period, while continued single-market access through membership of the European Economic Area would lower growth by 2%.

A source told the news outlet that the Prime Minister was not making the analysis public “because it’s embarrassing”. However, Iain Duncan Smith, former Conservative Party leader told the Today programme: “I would observe that almost every single forecast coming from government, and most of the international organisations, has been completely wrong. I think we should take this with a pinch of salt.”

But the economy unexpectedly picked up speed at end of 2017

Britain’s gross domestic product (GDP) grew by a better-than-expected 0.5% in the fourth quarter of 2017, according to figures from the Office for National Statistics (ONS).

The Bank of England (BoE) stated last month that it expected the economy may have moved slowly towards the end of the year, but the ONS data showed it actually grew at its fastest pace of 2017.

The median forecast in a Reuters poll of economists predicted growth would remain at 0.4% for the last quarter. 

Although in 2017 as a whole growth was 1.8% compared to 1.9% in 2016, experts state Britain’s recent recovery was helped by the improvement in the world economy in 2017.

Consumer confidence also experienced a surprise jump

New data has suggested that UK households’ consumer confidence grew unexpectedly in January.

The YouGov/CEBR Consumer Confidence Index saw a significant month-on-month rise - from 107.1 in December 2017 to 108.2 this month.

The index tracks the public’s outlook on household finances, property prices, job security and business activity. A reading of 100 or more indicates more consumers are confident than not.

Nina Skero, head of macroeconomics at the Centre for Economics and Business Research (CEBR), said: “Higher-than-expected GDP figures, a drop in inflation and now an uptick in consumer confidence - the new year is off to a promising start.

“With household finances and upcoming business activity metrics both on the rise, the 2018 slowdown that many had expected looks less likely to materialise.”

Mortgage approvals ‘weakest since 2015’

Britain’s housing market suffered a dip in December 2017, as mortgage approvals were at the lowest level in almost three years.

According to the BoE, the number of mortgages approved for house purchases fell to 61,039 compared to 64,712 in November 2016 - significantly lower than the drop to 63,500 predicted by economists in a recent Reuters poll. 

Howard Archer, chief economic adviser at EY ITEM Club, said: “Housing market activity ended 2017 in the doldrums.

“December’s sharp drop in mortgage approvals suggests that already pressurised housing market activity took a further hit from the BoE raising interest rates in early November.”

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