Economy growing weaker ahead of Brexit, says TUC

How are we doing? The impact of Brexit at industry level looks at how the economy as a whole, and individual industrial sectors, have performed in the year since the EU referendum. And it sets out actions needed by the government to strengthen the economy ahead of Brexit, and to negotiate a successful deal that puts workers and jobs first.

Many of the UK’s economic problems predate the EU referendum, for example low productivity growth, and weaker GDP growth than the long-term UK trend. But the report finds that since the EU referendum there has been a further weakening of the UK’s economic position:

• GDP growth is weaker – at just 1.7% for the last year, and an annualised equivalent of 1.0% for the last 6 months (page 7).
• Household finances are squeezed – devaluation of the pound and higher inflation have led to a decline in disposable income and record low saving rates (page 9).
• UK reliance on the EU market has grown – in the year to June 2017, UK exports to the EU grew by 6.3%, compared to just 3.7% for non-EU nations (page 11).

• Growth is slowing in most industries – in the year to June 2017, growth slowed in 11 of 20 industries (page 17).
• Real wages are falling in most industries – in the year to June 2017, only three out of 18 employment sectors saw real wage increases (page 21).

The report also identifies the industries that face the greatest risks from Brexit. Around 2.5 million jobs depend directly on trade with EU states. Of these, 1.5 million are concentrated in business administration, professional and technical services, manufacturing, and finance (page 26).

The report says that government action is needed now and in the autumn budget to strengthen the economy in preparation for Brexit. This should include (page 33):

• Infrastructure investment – raise from 2.8% to 3.5% of GDP to meet the OECD recommended level.
• Industrial strategy – introduce measures to give employees a stronger voice at work, which will help increase productivity.
• Migrant workers – strengthen rules to prevent employers undercutting existing wage levels.
• Communities affected by migration – direct more tax revenue from migrant workers to communities through an expanded migration impact fund.
• Guaranteed workers’ rights – include in the repeal bill a cast iron guarantee to protect workers’ rights under EU law from any dilution.

TUC General Secretary Frances O’Grady said:

“Our test for a successful Brexit is whether working people are better off. Throughout Brexit, the government must protect jobs, and deliver stronger growth that reaches workers’ pockets through higher pay.

“Successful Brexit negotiations are essential, but not enough. We have to deal with Britain’s long-standing problems like low productivity and weak public investment.

“But with just 18 months to go before we leave, the economy is growing weaker. And Britain is simply not investing enough in the infrastructure we need to compete with the world’s strongest economies.

“The Chancellor must take action in the budget to boost public investment. This would help restore business confidence and get firms investing more too. And ministers must set out a modern industrial strategy that gives workers more say to help boost productivity.”