Gloomy Outlook for the GBP

The UK economy after its controversial Brexit vote has been in the red with a mix of bad economic reports and worse future projections, as the influential UK think tank National Institute of Economic and Social Research (NIESR) said recently that, "320,000 jobs would be lost by the third quarter of next year and warned that the economy had a 50%chance of slipping into recession in the next 18 months".

As the latest data on economic growth which is the British services PMI that makes up 75% of the country's GDP shows the economy falling into a recession. The Services sector which comprises of almost all services offered in the economy from banking to waitressing witnessed its biggest monthly slump in activity from June to July since the market's history.

The recent developments complements a group of releases received this week that show major slowing in the construction and manufacturing sectors.

These reports also shows that every major sector in the UK economy is has been badly affected since Britain voted to leave the European Union. On the other hand, economic data released for the Eurozone economy depict that its performance has not been affected, not even in the slightest by the Brexit. Analysts’ believe that the UK may have cut their “nose to spite their face”.

PMIs which are numbers given out of 100 with any score above 50 signifying growth and any number below 50 signifying the opposite. The Markit and the Chartered Institute of Procurement & Supply on Wednesday morning released PMI data showing the services sector numbers coming at a shocking 47.4 for July after June's 52.3. "The figure is the lowest month-on-month slump since the PMI started in 1996", BBC economics editor Kamal Ahmed stated.

Many respectable analysts are now saying that with the outcome of the Brexit vote, there is a 50% chance of recession in the UK. With prices and many other economic indicators rattled by the market uncertainty, the Brexit has shown major effects on the UK economy and it's consumers in a lot of ways.

The NIESR also claim that inflation would rise to more than 3% for the first time in 5 years towards the end of 2017, implying that as the faltering GBP bolsters the price of imports the government will have no choice but to receive a loan of another £47 billion within the next four years.

According to the same think tank, “another major fundamental indicator shows that economic growth would slow to 0.2% in the current quarter from 0.6% in the previous three months and halt for the rest of the year. The Brexit effects would be as well felt in the growth that is forecast at 1% for all of next year but conditions could worsen”, it said.