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British economy gets 'Boris Bounce' as Europe struggles

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Negotiations: UK Prime Minister Boris Johnson with EU Commission president Ursula von der Leyen earlier this month

Negotiations: UK Prime Minister Boris Johnson with EU Commission president Ursula von der Leyen earlier this month

Negotiations: UK Prime Minister Boris Johnson with EU Commission president Ursula von der Leyen earlier this month

The British economy appears to have bounced back into life as some of the uncertainties over Brexit have been removed by the election there which delivered a big majority for Prime Minister Boris Johnson.

The sharpest rise in the IHS/Markit services Purchasing Managers Index since September 2018 pushed it to a reading of 53.9 for January from December’s 50.0.

That is positive news for the Irish economy which exports €2.4bn a month in services to the UK as well as €1bn a month in goods.

Based on the Central Bank of Ireland’s figures, a “hard Brexit” at the end of last year would have caused exports of both goods and services to fall by 2.5pc this year, a substantial loss compared with the 4.6pc expansion seen with the conclusion of the Withdrawal Agreement.

With a reading over 50 indicating an expansion as well as a pickup in manufacturing and something of a recovery in the ailing construction sector, t he all-sector PMI picked up from to 52.8 from 48.9 putting Britain firmly on what appears to be a recovery path.

“Even if the PMIs prove a little optimistic, it looks a safe bet that the economy started to grow again at the start of this year,” said Ruth Gregory, Senior UK Economist at Capital Economics.

Ms Gregory forecast that would translate into a 0.3pc quarter on quarter rise in gross domestic product in the first quarter of this year versus an estimated 0.1pc decline in the final quarter of last year.

The picture for the euro area was much bleaker, thanks to weakness in some of its biggest economies, led by Germany, France and Spain.

Retail sales in the Eurozone plunged by 1.6pc in December from November and while the bloc’s final Composite PMI January was also revised up, as in the UK, its reading of 51.3 points to growth of just 0.1pc in the first quarter, the same as in the final quarter of last year, according to Capital Economics.


Online Editors