Goldman: UK hurt by delays to Brexit
THE UK's protracted divorce from the EU is hurting the world's fifth-largest economy as dwindling company investment, signs of a looming labour market shock and poor productivity hinder growth, Goldman Sachs said.
The UK was due to have left on March 29, though Prime Minister Theresa May has been unable to get her divorce deal approved by parliament.
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Goldman Sachs said in a note to clients that its base scenario was the divorce deal would be ratified by May 22 but that there was a risk of it being delayed until nearer the new October 31 deadline.
"The politics of Brexit have become more protracted and, as a result, the side-effects of Brexit on the UK economy have intensified," Goldman said in a note entitled 'Brexit - Withdrawal Symptoms'.
"From a top-down and a bottom-up perspective, Brexit has taken a toll on the UK economy - even though it has not yet happened," Goldman said.
It said Britain's economy has underperformed other advanced economies since mid-2016, losing nearly 2.5pc of GDP relative to its pre-referendum growth path, in large part due to weaker investment.
Capital expenditure has been particularly subdued, Goldman said. Business investment has grown by just 0.3pc since June 2016, and 2018 was the first year in at least half a century during which business investment contracted in every quarter without a recession. It said growth would suffer until Brexit is settled and added: "In 2020, with Brexit resolved, we do expect a pick-up in activity as uncertainty abates."