Amid growing calls for second referendum Chancellor, Philip Hammond, discovers shortfall of half a trillion pounds
By Steve Ward, News Editor
19 Oct 2017
On the day when inflation rose to 3% the Office for National Statistics has revised its figures revealing that Britain is £490bn poorer than was thought. This is equivalent to 25 per cent of gross domestic product (GDP).
The revision follows a huge fall in overseas investment in the UK from a £120bn surplus in the first half of 2016 to a £25bn deficit over the same period in 2017. Simon Derrick, The Bank of New York Mellon's currency strategist, told The Telegraph: 'The outflows from the UK began in mid-August,' and added, 'The big buyers are disappearing.'
Underlining the dive in overseas investor confidence are fears over the stalling Brexit talks and the continued alarming gross productivity figures which saw hourly output fall of 0.5% in the first three months of the year - as revealed by earlier Office for National Statistics reports.
The pound has remained remarkably buoyant, propped up by a heady growth rates in consumer credit spending. In response earlier this year the the Bank of England warned lenders may be dicing with a 'spiral of complacency', with car loans a particular area of worry.
With UK inflation at highest since April 2012 the majority real earners' income has actually fallen, explaining the growth in borrowing and the Bank of England warnings. One solution to curb inflation and check borrowing would be a much anticipated Bank of England rise in interest rates. Though this would undoubtedly help investors, it would also end business access to cheap borrowing, putting further pressure on industrial development and productivity.
The influential Organisation for Economic Co-operation and Development (OECD) also warns that a disorderly Brexit could cripple the UK economy. In its latest report it controversially makes an argument for a further referendum to reverse the earlier decision. This will come as a boost to Lib Dem supporters and some Labour MPs such as Wes Streeting who commented 'Today’s OECD analysis should be the final nail in the coffin for the already long-buried notion that Brexit will benefit our economy'.
It will not, however, help Prime Minster May or Brexit Secretary The Rt Hon David Davis in their struggle to deliver on the British people's referendum decision.