The decisive election victory for UK Prime Minister Boris Johnson and his Conservative Party on 12 December 2019 has tilted the balance of factors that will decide the medium-term path for the economy from negative to positive. As we look for the UK to enjoy a cyclical upswing over the medium term (Chart 1), we ask the following questions.
| 1. | Following very weak growth in 2019, most forecasters see only a modest recovery in 2020. Berenberg is more optimistic. Why? |
| 2. | Businesses have reacted negatively to the heightened political uncertainty in recent years and remain pessimistic about Brexit. What is the outlook for business confidence and activity? |
| 3. | Unless the UK and EU either strike a trade agreement in time, or agree to extend the transitional period, there could be a hard Brexit at the end of 2020. How likely is this outcome? |
| 4. | PM Johnson has promised to end austerity. How big could the fiscal impulse be in the coming years? |
| 5. | Reacting to the global slowdown and intensifying domestic risks, the labour market lost some of its erstwhile momentum in late 2019. Will the labour market rebound in 2020? |
| 6. | Stronger sterling and falling energy prices tipped headline inflation below the BoE’s 2% target in late 2019. What is the outlook for inflation? |
| 7. | With a new governor at the BoE, what can we expect from monetary policy? |
| 8. | Which sectors are likely to do well over the medium term if Brexit risks remain contained and global demand improves? |
| 9. | Turning to the risks, how high is the recession risk in the next couple of years? Through which channels could that occur? |
| 10. | Sterling and gilts have tracked political developments closely since the Brexit vote, will this continue? |
Kallum Pickering
Senior Economist
+44 20 3465 2672
kallum. pickering@ berenberg. com
|
|
|
|
