In the months leading up to the EU referendum in June, George Osborne had two people he could always rely on to back the argument that Brexit would have immediate, dire consequences for the UK economy. One was Christine Lagarde, the managing director of the International Monetary Fund. The other was Ángel Gurría, the secretary general of the Organisation for Economic Cooperation and Development.
Osborne’s belief that voters would be swayed by fears of recession meant Lagarde and Gurría popped up regularly during the campaign. In the event, the plan did not work. Those who voted to leave the EU appeared sceptical about the forecasts produced by the IMF and the OECD – and those from the Treasury and the Bank of England, for that matter.
That scepticism has looked increasingly justified in the months since the referendum. The first prediction to go awry was that the economy would plunge into instant recession. It didn’t.
When the economy showed signs of resilience, there was a second prediction: the unexpected strength was driven by consumer spending and a different picture would be painted when figures for investment came in. Figures for investmentwere published last week. It was up in the third quarter.
There has been another retreat to a new fallback position. Yes, the IMF and the OECD admit, we were taken by surprise by the strength of the economy in the months after the Brexit vote and we have been forced to revise up our growth forecasts for 2016. But, take it from us, the outlook for the UK is still grim. The downturn is coming – it is simply a matter of time.
As such, the OECD expects the UK economy to slow from 2% this year to 1.2% in 2017 and 1% in 2018 – a markedly gloomier forecast than that produced by the Office for Budget Responsibility for last week’s autumn statement (1.4% and 1.7% respectively for the same time periods).
Despite the recent announcements from Google, Facebook, Apple, Jaguar Land Rover and Tata, the OECD is particularly concerned about the outlook for foreign direct investment into the UK.
Who knows, the Paris-based thinktank could be right. The Brexit divorce negotiations have yet to begin, after all. For the time being, however, the OECD should not be surprised if it is the target for the old joke: there are three sorts of economists – the ones who can count and the ones who can’t.