GBP: Britain’s potential productivity growth set to be significantly downgraded

The UK imported £22 billion of goods from Europe in August, while it exported just £14 billion. In addition, Britain also important £19 billion of goods from outside Europe – a record high – but exported £13.8 billion. These figures led to Britain recording a record high in trade in goods deficit in August. From this it is clear that the significant dip in sterling strength since the Brexit vote has not led to an increase of British exports as many predicted.

The Office for Budget Responsibility announced that it is expecting to significantly downgrade its previous estimates of Britain’s potential growth in productivity in another blow for the UK economy. The amendment, should it go ahead, is expected to take place in November. If productivity is on the slide, then economic growth becomes slower – giving Chancellor Philip Hammond a headache before his next budget.

In a forecast released yesterday from the NIESR thinktank, the UK’s economy probably grew by 0.4% in the last three months, which is a slight improvement from the second quarter. While it is only an estimate at this point and still comes in below recent trends, it is still an improvement and could encourage an interest rate rise before the year is out.