Major banks in the City of London had predicted post Brexit vote recessions – they said that if Britons voted to leave the European Union, there would be an economic meltdown. Isn’t it strange how rapidly those forecasts have miraculously vanished, only to be replaced by a different, more optimistic set of study results?
One of the advantages in being a ‘financial expert’, is that if your predictions were way off the mark, you simply create a new one. It makes one wonder whether they really do sit down and examine actual figures, or just pull numbers out of a hat, as one would do in a raffle. Banking and finance must be the only sector where mistakes can be made again and again and nobody gets fired.
Credit Suisse, Morgan Stanley and Goldman Sachs, three prestigious financial institutions that had warned of dire consequences if Britons voted to leave the European Union in June’s referendum, are now scaling back their forecasts, and admitting that no recession appears to be imminent.
The same bunch of forecasters who told us a couple of months ago that a Brexit vote would result in economic Armageddon is now telling us that things are looking good. Surely, they lost all credibility the first time round, didn’t they?
Post Brexit vote UK doing well
As fresh data over the past few weeks show that the UK economy is performing more robustly than expected – consumer confidence has increased, there has been an upturn in manufacturing, exports are up considerably thanks to a cheaper pound, and unemployment continues to decline – a growing number of people across the United Kingdom are beginning to conclude that the prophets of doom and gloom either lied to us or simply did not know what they were talking about, i.e. they were either dishonest or incompetent.
The United Kingdom’s trade deficit narrowed considerably in July – exports were up by £800 million to £28.4 billion, while imports declined by £300 million to £36.6 billion.
Even construction, which we were all certain would take a pounding after a Brexit vote, has fared much better than expected.
Massive change in UK outlook
Credit Suisse, which had told us the Brexit vote would lead to a 1% contraction in Britain’s GDP (gross domestic product) next year, now believes it will actually grow by 0.5%.
How quickly forecasts change… #Brexit pic.twitter.com/9Iym3D0h8N
— Matthew Goodwin (@GoodwinMJ) 10 September 2016
Experts working in other major financial institutions had forecast two quarters of economic contraction following a Brexit vote – which would technically put the country in recession.
Morgan Stanley had told us that GDP would shrink by 0.4% in the third quarter of this year. It has now switched to a 0.3% growth forecast.
Virtually all economists in the United Kingdom now agree on one thing: Voting to leave the European Union will probably not lead to an economic recession.
This is great news, isn’t it? It should be. However, there is just one problem. If we now know that all these experts’ forecasts were way off the mark, what proof do we have that their new predictions are accurate?
Why are these financial institutions using the same experts to make the new predictions, if their previous ones were so abysmal? Shouldn’t they be given their marching orders? The only one who has fallen on his sword so far has been former Prime Minister David Cameron.
Video – UK economy post Brexit vote
Victoria Craig, who works for Fox Business, talks about her impressions of the British economy after the Brexit vote.