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Brexit Explained: What Could Happen to the UK Next?

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ARTICLE 1 - shows the inflation rate of the UK

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The UK's inflation rate rose last month to its highest since September 2013, official figures show.

Inflation now stands at 2.7% - up from 2.3% in March - and above the Bank of England's 2% target.

The main reason was higher air fares, which rose because of the later date of Easter this year compared with 2016.

Rising prices for clothing, vehicle excise duty and electricity also played a part, but a fall in the price of petrol and diesel slightly offset this.

Last week, the Bank of England warned that inflation as measured by the Consumer Prices Index (CPI) would peak at just below 3% this year.

It also warned that 2017 would be "a more challenging time for British households" with inflation rising and real wages falling - leading to a consumer spending squeeze.

Pay including bonuses rose at an annual rate of 2.3% in the three months to February, according to the ONS. The latest figures on earnings growth are due out on Wednesday.

Cheaper fuel

The Office for National Statistics (ONS) said the cost of air travel went up by 18.6% from the month before, with Easter falling on 16 April this year compared with 27 March last year.

The price of clothes jumped to the highest level for six years, with a rise of 1.1% between March and April.

Electricity and food prices also went up, but there were falls in the cost of gas, petrol and diesel.

The Retail Prices Index (RPI), a separate measure of inflation which includes council tax and mortgage interest payments, reached 3.5% last month, up from 3.1% in March.

The ONS's new preferred inflation measure of CPIH, which contains a measure of housing costs, rose to 2.6% from 2.3% in March.

Chris Williamson, chief business economist at analysts IHS Markit, said: "The timing of Easter looks to have played an important role in pushing inflation higher in year-on-year terms.

"But sterling's depreciation since the referendum last June is also clearly a significant factor, lifting prices for imports and likely to pile further upward pressure on consumer prices in coming months.

"There are nevertheless signs that inflation could perhaps rise less than many had been fearing.

"Survey data are already showing companies' costs are rising at a slower rate than earlier in the year, and recent weeks have seen some easing in global commodity prices, notably oil."

'Transitory' effect

Suren Thiru, head of economics at the British Chambers of Commerce, said: "Businesses continue to report that the substantial increases in the cost of raw materials and other overheads over the past year are still filtering through the supply chain, and are therefore likely to lift consumer prices higher in the coming months

"However, it remains probable that the current period of above target inflation is transitory in nature, with little evidence that higher price growth is becoming entrenched in higher pay growth.

"This should give the Bank of England sufficient scope to keep interest rates on hold for some time yet, despite their recent warning."

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UK inflation rate at highest level since September 2013 - BBC News

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The UK's inflation rate rose last month to its highest since September 2013, official figures show. Inflation now stands at 2.7% - up from 2.3% in March - and above the Bank of England's 2% target. The main reason was higher air fares, which rose because of the later date of Easter this year compared with 2016.

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shows that the unemployment rate is low in the UK

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Bank of England Governor Mark Carney said last week that many companies remained hesitant to invest while the UK's future relationship with the UK was uncertain.

"We see some pick-up in investment and some positive contribution from net trade for most of the forecast, but it's not booming," he said.

The economy slowed down in the first quarter of the year even as employment rose strongly, so the amount of value produced per hour of work - a key measure of productivity - fell by 0.5pc. That is the first fall since late 2015, and reverses the 0.4pc rise in the measure in the final quarter of 2016.

Productivity growth is crucial to long-term improvements in wages and living standards, so the poor performance in the UK, and many developed economies, is a concern to analysts and policymakers.

Employment overall rose by 112,000 compared with the previous month, and by 381,000 on the year.

Most of the new workers - 91,000 on the month - found full-time jobs, while 21,000 gained part-time jobs.

Of the 8.5m part-time workers in the UK, only 12.4pc said they want a full-time job but have been unable to find one - the smallest proportion since 2009.

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UK unemployment at lowest level since 1975 - but prices rise faster than pay

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Bank of England Governor Mark Carney said last week that many companies remained hesitant to invest while the UK's future relationship with the UK was uncertain. "We see some pick-up in investment and some positive contribution from net trade for most of the forecast, but it's not booming," he said.

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-UK is facing a slower growth is GDP as there are inflation

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The UK economy suffered a sharp slowdown in the opening months of this year, as the post-referendum rise in living costs took its toll on British households and hit consumer spending.

GDP growth fell more than expected to 0.3% in the first quarter from 0.7% in the previous quarter, the Office for National Statistics said.

The official figures add to signs that the UK economy's resilience in the wake of the Brexit vote is now waning and will come as a blow to Theresa May's government as it banks on a solid victory in the snap election on 8 June.

Many economists expect the slowdown to continue as higher inflation dents consumer spending, a key driver for the UK economy. But the deterioration is still far off the Brexit-related slump some commentators had predicted.

"The first quarter's slowdown was led by consumers, whose incomes are under pressure from slowing employment and wage growth as well as rising inflation," said Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics.

"One quarter of slow growth is not definitive proof that the economy is on the ropes. But the pressure on consumers' incomes looks set to build this year as retailers pass on higher import prices."

The figures suggested consumer-facing sectors such as shops and hotels have been hurt in recent months by the squeeze on Britons' spending power from the pound's plunge since the Brexit vote. Sterling's weakness makes imports to the UK such as food and fuel more expensive. That factor combined with higher crude oil prices has lifted inflation to its highest level for more than three years.

Economists had predicted a more modest slowdown to 0.4% growth, according to a Reuters poll.

UK GDP chart

The 0.3% growth rate was the slowest for a year. There was also a sharp slowdown in GDP per head, which adjusts for the size of the population and is generally seen as a better guide to prosperity than mere GDP. It edged up just 0.1% in the first quarter after rising 0.5% in the previous quarter.

Statisticians said the biggest drag on growth was the retail sector, echoing other signs shoppers are cutting back. Growth in the services sector, which makes up more than three quarters of the UK economy, slowed markedly to a two-year low of 0.3% from 0.8% in the final quarter of 2016.

A leading thinktank underscored the pressures on household budgets as it noted the weakness in wage growth started long before the Brexit vote. After adjusting for inflation, employees' average earnings were still substantially below pre-recession levels, the Institute for Fiscal Studies said in a new analysis. On current forecasts, earnings would still not have fully recovered by the end of the next parliament.

"A period of this length over which earnings have fallen is unprecedented in modern times. They had started to recover a little between 2014 and 2016, but rising inflation linked to the fall in the value of the pound since the EU referendum has put a stop to that modest recovery," said IFS senior research economist Jonathan Cribb.

The ONS figures showed industrial production and construction output also slowed in the first quarter. But economists noted that their fortunes could yet improve over coming months. There have been signs that the weak pound has already helped exporters by making their goods and services more competitive overseas.

"The long-awaited slowdown is finally coming but I'd be wary of over-interpreting today's numbers," said Ian Stewart, the chief economist at Deloitte.

"Quarterly GDP growth is choppy and prone to revision. Inflation will continue to squeeze the consumer but the outlook for manufacturing and exports has brightened. Growth is slowing, but this looks like a cooling, not collapse, in UK activity."

Alan Clarke, an economist at Scotiabank, was also cautiously optimistic about the UK's longer-term prospects.

"The fears leading up to Brexit were that growth would stall due to a dive in confidence, hiring and investment. That hasn't happened. What did happen is the pound dived, pushing inflation sharply higher and that is causing consumer spending and hence overall growth to slow," he said.

"The good news is that the surge in inflation is probably temporary and the squeeze on growth should pass. However, it is probably going to take another year before growth is back on an upwards trajectory."

But others are more downbeat about the potential consequences of leaving the EU. The credit ratings agency Standard & Poor's reiterated its view on Friday
that the decision to leave "continues to present a significant risk to the UK's track record of strong economic performance, and to its large financial services sector in particular". It added that the Brexit vote had also increased instability in the UK as "highlighted by the snap election called for June 2017".

Economists at Barclays said GDP growth had come in weaker than the Bank of England had expected and strengthened the case for keeping interest rates at their record low of 0.25% this year and next.

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UK GDP growth slower than expected as inflation bites

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The UK economy suffered a sharp slowdown in the opening months of this year, as the post-referendum rise in living costs took its toll on British households and hit consumer spending. GDP growth fell more than expected to 0.3% in the first quarter from 0.7% in the previous quarter, the Office for National Statistics said.

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Shows the decrease in unemployment but salaries are still lagging behind inflation

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Wage growth is lagging behind inflation for the first time since mid-2014, official figures show.

Average weekly earnings excluding bonuses increased by 2.1%. in the three months to March, while inflation rose by 2.3% in the year to March 2017.

In the first three months of this year, wages fell by 0.2%.

Meanwhile, the number of unemployed people fell by 53,000 to 1.54 million in the three months to March, said the Office for National Statistics.

The UK unemployment rate has fallen to 4.6%, its lowest in 42 years,

The jobless rate has not been lower since the June to August period of 1975.

The employment rate, the proportion of 16 to 64 year olds in work, was 74.8%, the highest since records began in 1971.

Headache?

Ben Brettell, senior economist at Hargreaves Lansdown, said: "With inflation forecast to carry on rising - Bank of England policymakers predict inflation will peak at a little below 3% in the fourth quarter - household budgets look certain to be squeezed further in the coming months."

Dennis de Jong, managing director at UFX.com, echoed this sentiment: "Alarm bells will be ringing for Britons with wages continuing to fall. This could cause a headache for the government over the standard of living in post-Brexit Britain in the run up to next month's general election."

Analysis: Jonty Bloom, business correspondent

The UK economy is great at creating jobs, but not very good at paying people well.

That's because our productivity is falling: in the first three months of this year, it fell sharply by 0.5%, taking us back to the same level as in 2008.

Productivity is measured by dividing economic output by the number of hours we all work. It should increase steadily as we get better educated, trained and equipped - in short, more efficient at our jobs.

But it is in the doldrums again and that matters. If we don't make more, we can't afford to pay more and we are making no more per hour now than we did nine years ago.

Between January and March, the number of 16 to 64 year old women in jobs was 70.2%, also the highest rate since records began.

Meanwhile 79.5% of 16 to 64-year-old men were in work, the highest since 1991.

The ONS attributed the rise in the rate of women's employment, in part, to changes to the State Pension age for women, which has meant fewer women retiring between 60 and 65.

'Consistently higher'

The unemployment rate among 16 to 24 year olds was 12.5%, down from 13.7% in January to March of last year.

"The unemployment rate for those aged from 16 to 24 has been consistently higher than that for older age groups," said the ONS.

In late 2011 youth unemployment reached a peak of 22.5%, and even at its lowest in 2001 it was running at 11.5%.

Between early 1992, when comparable records began, and this year, the proportion of young people in full-time education jumped from 26.2% to 44%.

The number of UK nationals working in the UK increased by 179,000 compared with January to March of last year to stand at 28.31 million.

The number of non-UK nationals working in the UK increased by 207,000 to a record 3.55 million, meaning 11.1% of all people working in the UK are non-UK nationals.

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Wage growth is lagging behind inflation for the first time since mid-2014, official figures show. Average weekly earnings excluding bonuses increased by 2.1%. in the three months to March, while inflation rose by 2.3% in the year to March 2017. In the first three months of this year, wages fell by 0.2%.

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UK Jobless rate hit 42 year low

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United Kingdom Unemployment Rate | 1971-2018 | Data | Chart | Calendar

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The unemployment rate in the UK stood at a 42-year low of 4.3 percent in the three months to January 2018, unchanged from the August to October period and below market expectations of 4.4 percent. The number of unemployed rose by 24,000 while employment increased by 168,000, beating market expectations of a 84,000 gain.

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Brexit is the British's exit from the European Union (EU) on June 23 2016.

Due to this decision, the Sterling Pound's purchasing power has dropped significantly against the Euro's value. The
pound fell 0.7 percent to $1.2754 as of 4:50 p.m. in London, and touched $1.2720, the lowest since 1985. It sank 0.8 percent to 87.97 pence per euro, after dropping to the weakest since February 2013.

Due to Brexit, there have been concerns relating economic growth, investments and jobs in the British economy.

Firms have also been cutting on costs due to the weakening of the British economy. Eg, Toblerone

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1) Intro:
Unemployment between October to December 2016 and January to March 2017 had decreased while the number of people who are in the labour force working increased about 122,000 more than October 2016 to December 2017. About 74.8% who is economically active (Aged 16 to 64 ) is currently employed. The percentage above is one of the highest comparable record since 1971. With the economically inactive percent dropped from 21.8% to 21.5% is also one of the lowest record since 1971.

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2) Economic Issue 1: GDP
With the already weakened pound, UK GDP growth is falling. This has made import such as food, fuels and clothes to be more expensive for the locals.  There was a decreased in GDP due to the slowing employment wage growth even though there is a rising inflation. Thus people have lost the purchasing power to purchase goods, which leads to decrease in GDP.

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3)Economic Issue 2:

Employment hit a record high in March and unemployment fell to it's lowest ever since 1975. This is due to businesses hiring more workers.

There is a total of 31.95 million people working, in which 74.8% are 16 to 64 yearold.

In April, unemployment dropped to 4.6% in the quarter following January. Currently, there are 1.54 million people that are unemployed.

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4)Economic Issue 3: Inflation
The main reasons for the inflation rate's rise in recent months are:

1. Higher airplane fares
- went up by 18.6%
2. Higher prices in clothing
- went up by 1.1%
3. Higher prices for vehicle excise duty and electricity. However was offset by fall in prices of diesel and petrol.

The challanges faced by British households are due to rising inflation, real wages fall and consumer spending will be squeezed as a result.
5)Conclusion

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Good amount of research done to find out the basic facts for your project. You can write your report as it is, but if you want to make it better, you can do more research to find out why UK inflation is up. You should also include a little bit about Brexit too. Make sure to include relevant charts and tables to address your point. Anyway overall well-done padlet wall.

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907,000 people had been unemployed for up to 6 months, 48,000 lesser than a year ago. This means that UK had done a good job in keeping the unemployment rate as low as possible. However, this does not mean that the GDP and the Inflation rate is on a bright side

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Figure 11- UK Unemployment rates (aged 16 and over), seasonally adjusted