UK economy frail ahead of Brexit

The UK economy’s report card for 2016 reads “has made some progress, but could do better”. It has done well in terms of stock market performance and house prices – but these measures do not guarantee long term security or an end to austerity for working people.

The FTSE Share Index – which measures prices of shares traded on the London Stock Exchange – ended 2016 at its highest ever level, 7.142.83. Much nonsense has been talked about how this shows the high value of the UK economy and that international investors are confident in the country’s performance and potential. However, the Index does not derive from the value of the goods and services the country produces: it is just a measure of how much economic speculators believe that they can take a profit out of holding UK shares. If the confidence is shaken, investors will be off putting their money into some other country, quick as a flash.

Speculators hope that the value of the economy will catch up with the growing value of shares. However, that would require the UK to develop new products and/or services to sell (which has never been its strength) or to find new markets (in a world where most countries are still suffering from the 2008 global crash, are at war and/or are restricted by natural disasters).

The price of oil is relatively high (and forecast to rise further next year), which will not help the UK manufacture goods for sale around the world. The value of the £ sterling, compared with other global currencies, is low – which makes profits seem higher than they are but which also reduces the value of profits made by overseas investors.  House prices rose by a relatively modest 4.5% last year, and experts expect to that growth halve next year.

There is still uncertainty over Brexit, over what on earth Donald Trump will do in the USA and over the future of many European countries which are still having deep problems with their economies and/or are facing elections this year. Ever more Middle Eastern and Arab states are dealing with internal conflict or civil war.

While all these factors swirl above their heads, ordinary working people around the world continue to suffer and look in vain for political answers which will spread resources, and control of resources, more fairly. It’s a suffering which shows no signs of stopping yet.

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