Brexit uncertainty prompts strong growth

In Great Britain, economic growth in first-quarter 2019 accelerated to 0.5%. Compared to the prior year, it actually rose to 1.8%, the highest figure seen in about one and a half years. Paradoxically, in the last few weeks prior to the originally planned Brexit date the British economy benefited above all from fear of a “No Deal” Brexit – this can be gleaned from the details released on economic output at the beginning of the year.

Out of concern that there might be supply bottlenecks, consumers evidently stockpiled for emergencies, and companies likewise increased what were already high inventories. In industry, as many orders as possible were filled prior to the Brexit deadline, and the first quarter thus recorded the highest climb in production in ten years. State spending for preparing Brexit was once again high. The quarterly rise in government expenditure for the second time exceeded 1% – another first since the days of the financial crisis. The flip side: Imports posted record growth, too, of almost 7%, otherwise GDP growth would have been appreciably higher still.

This trend is of course not sustainable. Now, a clear rebound downwards is already emerging for the current quarter. The high inventories need now to be utilised. And some industrial operations brought their summer vacation period forward to April. Overall, the strain on economic growth caused by Brexit has lessened considerably in recent weeks as the risk of a “No Deal” Brexit has significantly eased and a “softer” solution has become more probable.


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