FTSE 100 surges to new record high but most economists STILL gloomy about Brexit in 2017
BRITAIN’S biggest companies surged in value on the first official trading day of 2017 as the FTSE 100 reached a new record high.
The UK’s blue chip index set an intra-day record of 7,205.21 today, having soared past last Friday’s all-time closing high of 7,142.83
But, despite the buoyant start to the New Year for Britain’s stock exchange, a majority of UK economists offered a gloomy forecast for 2017 following last summer’s Brexit vote.
An annual Financial Times survey of 122 economists found a majority expected a ‘significant’ or ‘marked’ slowdown in UK economic growth this year, with Theresa May due to trigger Article 50 and kickstart EU divorce talks by the end of March.
Most predicted Britain would see economic growth no larger than 1.5 per cent in 2017.
In 2016, the UK is expected to have been the fastest growing major economy in the world, with Chancellor Philip Hammond having used his Autumn Statement to report a higher rate of forecast economic growth for the year.
The forecast defied pre-referendum ‘Project Fear’ predictions from the Treasury of immediate economic disaster if Britons’ voted to quit the EU, with most economists having also warned against Brexit.
But the UK economy’s resilience last year does not appear to have altered most experts’ opinions.
Reflecting the continued pessimism about the post-Brexit economy, HSBC’s Liz Martins told the newspaper: “We think the uncertain reality will hit home [in 2017], with a fall in investment and slowdown in consumption as inflation erodes real wages.”
Leading Leave supporter Patrick Minford, a member of the Economists for Brexit group, was one of the few respondents to offer a bullish view.
The Cardiff University professor expects economic growth to follow 2016’s performance over the next 12 months, with the UK economy to grow between two to three per cent in 2017.
Professor Minford cited the opening up of global free trade, removal of Brussels’ red tape and restriction of low-skilled EU immigration as Brexit benefits for the UK economy.
Jim Fallon: The UK's economy is strong since Brexit
The UK economy’s resilience last year does not appear to have altered most experts’ opinions
Today’s surge in the FTSE 100 was attributed to last week’s so-called ‘Santa rally’ of end-of-year stock prices and rising oil prices.
The fall in the value of pound sterling following the Brexit vote also continued to boost demand for UK manufacturing exports.
The pound rose 0.1 per cent against the US dollar and 0.7% per cent against the euro after the Markit/CIPS manufacturing purchasing managers' index (PMI) rose to 56.1 in December, up from 53.6 in November and above economists' expectations of 53.3.
A reading above 50 indicates growth.
The slight rise in the pound could keep the FTSE 100 from reaching another closing high at the end of trading today, as many of the index's multinational companies tend to benefit from earnings in currencies - such as the US dollar - which are stronger than sterling.