The landscape for UK politics is changing. News that seven Labour MPs and four Conservative MPs have defected to form a new Independent Group highlights the current fragmented state of UK politics. PM May delayed the “meaningful” vote on Brexit to March 12th, adding to the uncertain picture for the UK economy, meanwhile the labour market powers ahead.
The UK economy almost came to a halt in Q4 last year as mounting Brexit concerns took its toll on business investment. However, consumer spending maintains its gradual recovery, driven by higher real incomes.
Following a path laid by the US Federal Reserve, who recently adopted a more neutral position towards monetary policy, the Bank of England’s February Inflation report clearly signalled no urgency to raise rates. The 2019 growth forecast was cut sharply. The main culprits were mounting concerns about Brexit plus the wider global outlook.
Another strong US employment report and improved manufacturing sentiment contrasts with continued lacklustre Euro area growth and a downbeat Chinese PMI survey, highlighting diverging trends in the global economy.
Prime Minister Theresa May is due to unveil Brexit plan B to Parliament today but it is unlikely to differ much from her first version. Following a crushing defeat on the Withdrawal Agreement and having narrowly survived a no-confidence vote, Mrs May offered an olive branch of cross party talks but was rebuffed by Labour leader Jeremy Corbyn. Talk of an extension of Article 50 is on the rise but an exit from EU without a deal is still possible.
Following the recent Grieve amendment, the chances of Parliament passing PM Theresa May’s Withdrawal Agreement tomorrow look very slim. A rejection would force Mrs May to unveil a Plan B next Monday. An array of outcomes is possible with an increasing chance of Article 50 being extended.
Initial reports from the UK high street during the festive period were mildly encouraging. Witness stronger than expected outturns from John Lewis and Next. Still, it is premature to draw strong conclusions about retailing.
UK workers received a Christmas bonus with the highest wage growth for a decade reported last week. The labour market is yet again the star performer in an economy that is otherwise losing a little momentum.
Last week the focus was on the Bank of England’s no-deal Brexit scenarios. This week it will be Parliament in the lime-light.