Predictions of Brexit Doom

Before (and immediately after) the Brexit referendum, a number of “experts” made various predictions:

On 21 January 2016, Adam Posen, a former member of the Bank of England’s Monetary Policy Committee warned, “A “no” vote in the European Union referendum runs a serious risk of pushing Britain back into recession.”

On 27 April 2016, the OECD said, “From the moment of a Brexit vote until the arrangements for “divorce” are definitively settled — years later — there would be heightened economic uncertainty, with damaging consequences. Brexit would lead to a sell-off of assets and a sharp rise in risk premia. Consumer confidence would fall, as would business confidence and investment, thus holding back growth.”  In reality, immediately after the Brexit vote, UK economic growth remained stable at 0.6% of GDP in Q3 of 2016, and increased to 0.7% in Q4.

On 12 May 2016, the Governor of the Bank of England warned “that Britain risks going into recession if it votes to leave Europe.” Mr Carney said a vote to leave the European Union would “lower growth materially and raise the rate of inflation notably”.  On that day, the Bank of England reduced growth forecasts (which assumed that the UK would vote to remain in the EU).

On 13 May 2016, “Christine Lagarde, the IMF managing director, also backed warnings from the Bank of England governor Mark Carney that Britain could fall into recession following a Brexit vote.”  In addition, “The IMF said a panic among investors would trigger shockwaves throughout the economy following a vote to leave, sending shares and property prices into downward spiral.” None of these things happened.

On 23 June 2016, the referendum was held.

On 26 June 2016, Goldman Sachs said, “The U.K. is likely to enter a “mild recession” by early 2017, following its vote leave the European Union (EU).”  As of February 2017, there has been no recession, and economic growth is actually increasing.

On 12 July 2016, “Economists at Barclays say the UK economy is now contracting and is expected to do so until at least mid-2017.”  As of February 2017, there has been no recession, and economic growth is actually increasing.

On 19 July 2016, the IMF cut 2016 economic forecasts for the UK, saying, “The U.K. economy will expand 1.7 percent this year, the IMF said, 0.2 percentage point less than forecast in April.”  In reality, 2016 economic growth accelerated.

On 20 July 2016, Morgan Stanley “predicted that the uncertainty surrounding the UK’s future following the vote to leave the European Union will push the country into recession by the end of 2016.”  Further, they said, “In the immediate aftermath of the vote to leave the EU, our judgement is that a pullback in investment, combined with a consumer slowdown, will be enough to lead to a technical recession, i.e., two successive quarters of negative growth.”  There was no recession in the immediate aftermath of the vote.

On 22 July 2016, the “Markit purchasing managers’ index (PMI) indicated the economy had been plunged into its steepest downturn since the height of the financial crisis in early 2009.”  In reality, UK economic growth remained steady at 0.6% in Q3 of 2016, and increased to 0.7% in Q4.

On 4 August 2016, “The Bank [of England] said the UK economy will virtually grind to a halt in the wake of the Brexit vote – coming perilously close to another recession…the Bank is now expecting quarterly GDP growth to slump to just 0.1 per cent in the third quarter of the year – and to eke out roughly the same meagre output in the final quarter.”  In reality, Q3 GDP growth remained steady at 0.6% and increased to 0.7% in Q4 of 2016.

 

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