Brexit Update: Political battles and economic developments

The past two weeks have provided a preview of the political battles that are tied to Brexit, both within the UK and between the UK and the EU. However, such political troubles have been tempered by a fortnight in which there has been some economic good news for a UK economy living in the shadow of Brexit.

May’s Awkward European Council Debut

On 20-21 October, Theresa May attended her first European Council meeting in Brussels. The event demonstrated the work that must be done by the British government in order to mend ties with EU leaders, and highlighted the fact that negotiations will be extremely tough.

May addressed her fellow EU heads of government over dinner on 20 October, but her speech began only at 1 am, long after the dinner had ended, and she was allotted only five minutes to outline her views. This rather awkward and stony encounter serves to emphasise the important role that the EU will play in shaping the Brexit settlement. The UK may push for any settlement it wishes, but it must secure the consent of the EU in order for it to be established. Crafting goodwill between the British government and EU officials is therefore crucial to a positive outcome. 

UK Economy Weathering the Storm?

In a boost to Brexiteers, recent economic indicators suggest that the UK economy has yet to take a significant hit as a result of Brexit. Growth figures for the third quarter showed that UK Gross Domestic Product (GDP) grew by 0.5%, down from 0.7% in the second quarter, but still greater than many economists had expected. Commenting on the figures, Joe Grice, the head of the UK Office for National Statistics, stated that ‘there is little evidence of a pronounced effect in the aftermath of the (Brexit) vote.’

Despite this, the growth was entirely supported by the services sector, which grew by 0.8%, while manufacturing, construction and agriculture all contracted slightly. Furthermore, the greatest economic shocks may be yet to come, as the nature of the post-Brexit settlement is carved out and becomes a reality. However, there is little doubt that the UK economy has thus far shown a robustness that has exceeded many expectations.

Nissan boost, but at what cost?

In a further boon for British economic hopes, the car manufacturer Nissan announced on 27 October that it will build its new Qashqai and X-trail models at its factory in Sunderland. The decision safeguarded the 7,000 jobs at the Sunderland plant, as well as an estimated 28,000 related supply chain jobs. This was the first major industrial announcement about the UK’s automobile industry since the Brexit vote, and was seen as a litmus test for how disruptive Brexit fears will be for UK manufacturing.

However, it soon emerged that the price the UK government had to pay for this announcement was an assurance that the trade between the UK and the EU in the automotive sector would be free ‘of tariffs and bureaucratic impediments.’ Such an arrangement suggests that the UK will push for what is essentially single market access for the automotive industry, which will prove hard if the UK refuses to accept freedom of movement.