Consensus forecasts show UK economic growth of around 1.1% in 2020, down from 1.3% last year, with Britain likely to remain trapped in a low interest rate environment post-Brexit, according to Dr John Ashcroft.
Consensus forecasts show UK economic growth of around 1.1% in 2020, down from 1.3% last year, leaving Britain likely to remain trapped in a low interest rate environment post-Brexit, according to Dr John Ashcroft, author of The Saturday Economist.
‘Further talk of one interest rate cut in the UK and further cuts in the US as growth slows (possibly below 2% this year) suggest long rates will remain under pressure,’ Ashcroft said.
‘We remain trapped on Planet ZIRP [Zero interest-rate policy].’
UK Chancellor reassures firms about ‘no alignment’ with EU rules post-Brexit
Business leaders were eager for clarification after the UK Chancellor Sajid Javid said that there would be ‘no alignment’ with EU regulations in a post-Brexit trade deal with the EU last week.
‘Manufacturers like common standards on products and components in many markets,’ Ashcroft wrote in a blog post. ‘Common standards guarantee quality, generate lower unit costs, economies of scale and improve productivity.’
‘The Chancellor claimed the Treasury would not lend support to manufacturers favouring EU rules,’ he added. ‘That just does not make sense.’
However, the Chancellor has since toned down his rhetoric, which initially shocked British industry, with Javid clarifying that divergence from EU rules will only occur if it is in the UK’s economic interest.
FTSE 100 bogged down by uncertainty
The blue-chip index has had a mixed start to the new year, with it climbing more than 130 points in the first half of January, only to see those early gains eroded, with it tumbling a little over 2% this week.
The FTSE remains bogged by uncertainty on economic growth and the direction of sterling, according to Ashcroft.
A clear direction on Brexit with a planned exit at the end of the January this year saw the pound bounce to test the $1.34 level only to fall back to $1.31.
‘A test and proof of the $1.30 level may now continue for some time,’ Ashcroft added.
The FTSE 100 is trading at 7628 as of 10:15 (GMT) on Friday.
By Aaran Fronda
Source: IG