Countdown to Brexit: 87 days – A New Year and a new set of economic forecasts

The Times has published the collected views of 52 economists - including four prominent ‘Brexiteers’. 

There is a consensus that a ‘no-deal’ and ‘disorderly’ departure “would require intervention from the Treasury and the Bank of England that would leave the UK with a larger deficit” – at least in the short term.

1 in 5 believe it will be a no-deal Brexit; 3 in 5 predict that UK will accept the deal; and 1 in 5 have remain as a significant probability.

No one is forecasting a UK recession.

London house prices look almost certain to fall - and nearly one-in-three economists reckon that house prices will fall nationally.

The majority opinion was that average earnings growth will not pick up materially from its present level of just above 3 per cent and that inflation will barely fall, hovering at about 2 per cent.

In short - another year of “gently rising living standards - but no bonanza.”


The Chancellor has promised a Brexit “deal dividend” if the Withdrawal Agreement is accepted by MPs. 

The majority of the economists, however, do not believe there will be any upside. ‘Brexiteers’ anticipate no-deal while ‘Remainers’ - who assume a ‘soft’ Brexit on Theresa May’s terms - are sceptical.  Whatever ‘Brexit dividend’ there might have been has vanished.

In the event of a no-deal Brexit, few believe the Bank of England’s warning that interest rates will jump - the Bank’s worst-case scenario has assumed a 25 per cent collapse in the pound and rates rising to 5.5 per cent.

More respondents, including Brexiteers, expected a rate cut or more quantitative easing alongside fiscal stimulus from the Treasury.

Tax cuts were a popular emergency response – and VAT in particular.

One unknown is the political situation - a fiscal stimulus might make sense, but it could be complicated because “the government may be in total disarray for quite some time.”


The economists’ growth forecasts for 2019 and 2020 are fairly benign with the UK more or less holding its own against the eurozone.  Over the next 2 years, forecasts for the UK are clustered between 1.5 per cent and 2 per cent.  The eurozone median is a little higher.

The UK outlook is helped by a forecast ‘bounce’ in business investment as companies step up spending once the worst of the political uncertainty clears – and there is a pick-up in business investment, in line with government thinking. 


A year ago, the pound hovered between $1.38 and $1.42 as Brexit appeared to be proceeding to plan.  As the 2018 news worsened – including the “Cabinet bust-up” at Chequers and Parliament wanting “everything it could not have” - sterling ends 2018 at $1.26 - a fall of 12 per cent from its high of $1.43 in April.


Predicted to be down from 3 per cent to 2.3 per cent - will be a reflection of sterling’s movement.  The majority of economists believe the pound will end 2019 higher than today’s level - putting downward pressure on inflation.  Of course, all forecasts will be ripped up if there was no-deal.

Most economists believe wages will grow roughly as at present - just over 3 per cent

The oil price is so unpredictable that The Times did not ask for forecasts.


As prices fall, the pressure on the Bank to raise rates will wane.  Even so, interest rates are expected to climb in 2019 from the present 0.75 per cent 1.25 per cent.

On balance, households should expect an increase in borrowing costs. Unless, according to Remainer economists, there is a hard Brexit, when rates are more likely to be cut, at least temporarily. Respondents got it right last year, accurately predicting that rates would end 2019 above the then level of 0.5 per cent.


Falls in the value of their homes will be greatest in London – already down by 1.7 per cent in the year to October - and the no upside for the rest of the country.

The most pessimistic model sees sterling fall to parity with the dollar, the economy on course for a severe recession in 2020, driving negative house price outlooks for London.

House prices rose nationally by 2.7 per cent in 2018.


The majority of economists expecting the demise of Philips Hammond  think Tory squabbling over Brexit will be his undoing in 2019.

A successor for Bank of England Governor, Mark Carney, as must be found in 2019.  Andrew Bailey, Chief Executive of the Financial Conduct Authority is favourite in the survey.

Mr Carney’s has been extended his tenure twice already - so who knows?


We had expected lots of noise over this article - but it seems to have been generally accepted.  It does, however, paint a good set of economic conditions for those looking to plan their survival strategies for Brexit - and making the most of the opportunities in the post-Brexit world.


  • Bronwyn Curtis, a non-executive member of the Office for Budget Responsibility: “No transition can be orderly, in that everyone is focused on leaving and uncertainty means more businesses will leave [the UK] and investment fall further.”

  • Jagjit Chadha, director of the National Institute of Economic and Social Research think tank: “The next set of negotiations about the final form of exit will come into focus and may act to dampen activity in the same way [as recently].”

  • Matthew Whittaker, deputy director at the Resolution Foundation think tank: “The Office for National Statistics’ decision to reclassify student loans may have “wiped out” the £15 billion Brexit buffer that the chancellor had earmarked for the deal dividend.”

  • Stephen King, senior economic adviser at HSBC, suggested there could be an increase, but it was “unlikely [to be] to the degree outlined”. Rain Newton-Smith, the CBI’s chief economist, said the first move would be a cut but the Bank may shortly have “to change tack”.

  • Simon French, chief economist at Panmure Gordon; Simon Ward, chief economist at Janus Henderson; Philip Shaw, Investec’s chief economist; and Vicky Pryce, a director at the Centre for Economics and Business Research, suggested reopening the Bank’s term funding scheme for commercial lenders — to ensure that credit remains cheap and that companies are not strangled by their debt.

  • David Miles, a former rate-setter and now a professor at Imperial College London, reckoned that the Bank could be more radical and extend its corporate bond scheme to include “other private assets”.

  • John Wraith, head of UK rates strategy at UBS, expects rates to drop to 0.1 per cent.

  • George Magnus, an associate at Oxford University’s China Centre, said that policymakers may even go so far as “to use the Bank’s balance sheet to fund specific fiscal programmes”, a form of Brexit helicopter money.

  • Cathal Kennedy, European economist at RBC Capital Markets, suggested business reliefs and Mr Lyons recommended specific “help [for] those sectors impacted directly by no deal”.

  • Mr Chadha said that spending should be on “infrastructure, R&D and human capital” — to accelerate supply side reforms.

  • Ruth Gregory, UK economist at Capital Economics, estimated that the fiscal stimulus would be about £20 billion, or 1 per cent of GDP, a good proxy for the average of responses.

  • Tony Yates, a former Bank of England economist: a fiscal stimulus might make sense, but it could be complicated because “the government may be in total disarray for quite some time.”

  • Tej Parikh, senior economist at the Institute of Directors: “It’ll take a while for businesses to bounce back from a period of prolonged uncertainty - so while investment should nudge up slightly next year, it could stay disappointingly subdued.”

  • Howard Archer, chief economic adviser at the EY Item Club: “Business investment should benefit from a deal” – and lower migration is likely lift growth “by firms looking to invest in automation to make up for labour shortages.”

  • Erik Britton, Fathom’s director says growth will struggle to rise above 0.5 per cent in the UK, with no business investment boost, and 1.3 per cent in the eurozone in 2019 - while 2020 will see “a global recession”

  • Vicki Pryce predicted the pound to be “$1.00 to $1.15 with no-deal - as markets will react negatively and there would almost inevitably be a recession”.

  • John Philpott, an independent labour market analyst: “as the tight labour market offsets the drag effect, [it will be] another disappointing year for growth in labour productivity.”

  • Mr Minford expects to see a big increase in rates to 1.5 per cent as wage growth of more than 4 per cent offsets the deflationary effect of a sterling appreciation to $1.35.

  • Mr Lilico - who anticipates an economic slowdown next year - sees rates cut to 0.25 per cent as wage growth slows to 1.5 per cent.

  • Mr Lyons expects sterling, wages and rates to hold steady and Ms Lea expects only a single quarter-point increase.

  • David Blanchflower, a former Bank rate-setter, expects a cataclysmic 35 per cent reverse in London house prices – with a 25 per cent fall nationally.

  • Sir Christopher Pissarides, a Nobel laureate and professor at the London School of Economics, expects a “very small contraction” in house prices nationwide - and “a little bigger contraction in London at £2 million-plus”.

  • Mark Gregory, EY’s chief economist, expects national house prices to fall by 3.5 per cent and “at least 5 per cent” in London.

John ShuttleworthComment