Oh dear. Poor sterling. Within a week of the issue into circulation of new indestructible five pound notes in the UK, the face value of these washable items has eroded against foreign currencies, particularly the Euro.
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As the stock market brushes off worries about Brexit, the beleaguered pound is hit every time there is any ‘Brexit’ news, such as Teresa May’s recent Conservative party conference speech which was interpreted to mean the UK would settle for a ‘hard’ Brexit (i.e. the possibility of leaving both the EU and the European Single Market). This was followed by a somewhat cautious speech by the Chancellor of the Exchequer explaining that there could be some economic turbulence ahead, and formally abandoning the aim of eliminating the budget deficit by 2020 to allow for the possibility of pump priming in the form of borrowing for infrastructure projects to boost the economy.
The truth is that no-one knows what is going to happen to the UK economy and an uncertain future is hard to accept, especially by journalists and politicians. Remember, we haven’t even started Brexit negotiations and will not leave the EU before mid-2019 at the earliest.
Despite or because of this, the press and media are pursuing partisan campaigns either to convince everyone that everything has improved since the Brexit vote (and will continue to do so) or that we should be more pessimistic about the future as a result of the decision. Naturally, this reflects the remnants of the ‘Brexit’ and ‘Remain’ propaganda so awfully presented to the public before the vote in June.
It is therefore virtually impossible to make sense of economic indicators as they are presented to us by the media. Take for example the news that the World Economic Forum has recently published its latest Global Competitiveness Report in which Britain has risen three places since last year, and is now ranked the seventh most competitive country in the world. So far, so good. This is a fact. Another fact is that the report covers a period prior to the UKs decision to leave the EU in June.
However, if we look at how this news was presented in the media, things all get rather confusing. The Guardian, whose readers were mostly sceptical about Brexit, headlined this news with: “Brexit vote puts Britain’s rising competitiveness at risk, says WEF” followed by a cautionary message highlighting the risks of Brexit to our previous competitiveness.
By contrast, the Daily Telegraph, whose readers include many Brexit supporting conservatives, headlined on the same story with “Britain leaps into seventh place in competitiveness rankings as powerhouses Germany and Japan slip”. Whilst noting that the rankings do not take into account June’s Brexit vote, it says that the WEF stated there are reasons to be optimistic about the UK’s competitiveness and that Britain has cemented its position as “one of the most competitive economies in the world”.
The Daily Express was slightly less subtle. Its headline was “Brexit Britain SOARS: UK rises to seventh MOST COMPETITIVE economy in the world”. It claims that the WEF said that the vote to leave the EU would mean that the UK could set regulations that were optimal to the UK, instead of having to compromise with other nations. There is no doubt about this interpretation.
Another example of partisan reporting was the recent news of UK GDP data and revised forecasts. The Guardian headlined this news story with “UK services sector defies gloomy expectations as GDP grows by 0.7%” conceding that “Britain’s vast services sector defied gloomy expectations to continue growing after the Brexit vote and the economy was expanding faster than previously thought in the run-up to the referendum.” It later qualifies this by stating that “fresh data tends to support the view that there has been no sign of an immediate shock to the economy, although the full picture will continue to emerge.”
The Daily Mail, another Brexit leaning newspaper, states with partiality that “Project Fear turns into Project Cheer: EU vote has had no impact on economic growth and household spending saw biggest rise since 2007 as Brexit bounce continues”.
The Sun continues this level of optimism with a headline: “Britain’s post-Brexit economy is growing faster than expected… just as Europe’s falters – adding “UK’s GDP forecast to rise by 1.8 per cent, suggesting Remainers’ warnings of a post-Brexit recession were simply scaremongering”.
What we seem to be reading are interpretations spun around pre-conceived views about Brexit, not objective analysis.
Economists and the politicians are having enough trouble separating the wheat from the chaff, let alone the public. It’s probably best to keep an open mind until a clearer picture emerges, whenever that may be.
Unless you are a currency trader. They don’t seem to read the papers.
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This article was written on the 4th of October, 2016.