Archives: Blog Brexometer

No spring in the step

The nation has a little nap to recover from Brexit stress

This month there was not much movement across both economic and political measures as the UK took a breather after the trials and tribulations of March and April. A welcome period of stability, you might say.

This month the Accountagility Index (AAX) moved up only ONE basis point to 5.10. Last month it was 5.09. The Index records UK political and economic health in a score out of ten. Any score below 5.00 is negative. Many factors did not change greatly over the past few weeks, and those that did, cancelled each other out.

So what can be gleaned from this month’s data?

Since the movements were slight, let’s see what we can divine from these modest changes.

The economy is showing remarkable resilience. Employment continues to be at a generation high, but there are subtle indications of smaller tremors suggesting that the construction sector is trimming its workforce, as the new rate for the National Living Wage comes into force. Inflation is gradually coming down, and will continue to head south, so that’s a blessing for businesses. Markets have softened but it’s a drift rather than a drop. The Pound rose marginally over the period. Foreign investment is a curate’s egg, because official stats show elevated levels, but other data suggests a softening.

Politically, we are in a hiatus where the two political parties are supposed to be in talks around an agreed Brexit position, with the Customs Union option to the fore. It would be a highly unusual outcome if the two main parties, normally at each other’s throats, were to agree on something as strategic as a Brexit deal; but that is what they are presently engaged in negotiating. At least for now, there is no imminent threat of a no-deal Brexit and of course the exit date of the end of October seems a way off after all the short-term concerns of the recent weeks.

What else has been happening?

Business confidence is up this month, with all three economic sectors in the black. Picking out Construction, there is a fast rate of growth in house building, which has masked the downturn in commercial work and civil engineering activity. The fall is (unsurprisingly) down to Brexit uncertainty, with fewer tenders for major programmes being issued and decisions on new work being postponed. In the Manufacturing sector, as we predicted last month, confidence and activity has declined, as there is no need for stock-building ahead of a possible disorderly Brexit, at least for the time being. The biggest concern this month is early signs that supply chains are being re-routed, again due to Brexit concerns. It seems inevitable that the construction confidence will now experience a decline going forward. For those who enjoy the economic detail, the Index based purely on such factors is at 5.89, down from 5.93 last time, but still a mighty number.

A few other positive nuggets to enjoy. There has been a rebound in medium term optimism in both the Services and Manufacturing sectors, with new technologies, expansion plans and new product launches being cited as the grounds. Good news also emerged that shoppers were active in April, with a 2.5% increase in household spending being recorded. There was a 10% rise in spending at pubs and restaurants, showing that people still like to enjoy themselves. Perhaps they were just getting away from politics for a while! 44% of investors are more optimistic about the UK than the rest of Europe, in another survey, but is that more of a reflection on the stalled European economies?

What happens next?

We are all having a rest from Brexit at the moment, but will it last? Will we be stable in May, or will May be back in her stable? Will the European elections, which have been confirmed as happening after all, create further turmoil? The new Brexit Party may have a few things to say over the next few weeks, and there is constant chatter about a change of leader. Will we see continuing resilience from the economy, or will ongoing uncertainly eat into the score? How will the Index react?

Keep following the Brexometer to find out.

Footnote

Last month we set up a competition open to everyone, to predict this month’s score. May’s winner is Jack Murray, who came closest with his prediction of 5.11. He has won the special prize, a Brexometer tenner with the serial number starting AA, one of the first new plastic ten pound notes ever printed. Next month would you like to join in? There is another Brexometer tenner to win, together with a framed certificate to show off your awesome punditry to your colleagues and friends. Just email your own prediction (a score out of ten to two decimal places), and this special keepsake could be yours… or you could just spend it!

Now it’s a Halloween date for Brexit 

After a late night of discussions, the white smoke emerged from the meeting of EU leaders last Wednesday, with the date of the UK’s exit from the EU delayed to 31st October 2019. Will this be a ghoulish end?

Now, no more bad trick or treat jokes, because we need to get down to the serious business of the UK political and economic situation.

This month the Accountagility Index (AAX) moved up six basis points to 5.09. Last month it was 5.03. The Index records UK political and economic health in a score out of ten. Any score below 5.00 is negative. Given the torrent of bad news, this move upwards may seem counter-intuitive.

What caused the rise this month?

The biggest influences on the upward trajectory were the rise in the markets, with both the FTSE 100 and the FTSE 250 showing growth over the last month, and the temporary reprieve from the extreme uncertainty of an unruly exit. Other positive factors were the drop below 4% of the unemployment figures, showing that the UK is still generating jobs; inward investment which showed a pleasing blip up; and sterling which has been reasonably resilient. Lastly, there was good news that GDP expansion was above expert forecasts, an extra 0.2% being added, with the IT sector showing a strong performance. Furthermore, February saw the highest output in production and manufacturing since April 2008. Overall. This meant that the score for the economy only rose seven basis points to 5.93, a post-referendum high. Whilst some numbers are trending lower (see next section), this is the time to bask in a remarkable and resilient economy.

What else is happening?

Business confidence is down, and the most worrying stat this month is that the driver of the British economy, the Service sector, fell below 50 for only the second time in over six years. The last time by the way was during the month of July 2016 when the news of the Brexit result caused momentary panic. The reason for the fall (as if you couldn’t guess)? – Brexit uncertainty pushing orders back. The Manufacturing rating at over 55 is also down to Brexit – but in this case it’s stockpiling in case of a disorderly exit. These two trends will undoubtedly be reversed now that the Brexit date is six months away.

What happens next?

As we predicted last month, we now have another six months of the Brexometer! So devotees can relax. But much more importantly, we have six months of more political manoeuvring, of uncertainty and of confusion in Westminster. I hope you have a strong heart!

Over the coming month, what kind of news will we see? Will May still be PM in May? Can she possibly reach agreement with Jeremy Corbyn? Will we see economic warmth as the evenings get longer, or the chill of political infighting and disagreement? How will the Index react?

Keep following the Brexometer to find out.

Footnote

Last month we set up a competition open to everyone, to predict this month’s score. April’s winner is Stacey Munday, who hit the nail on the head with her prediction of 5.09. She wins the special prize, a Brexometer tenner with the serial number starting AA, one of the first new plastic ten pound notes ever printed. Next month would you like to join in? There is another Brexometer tenner to win, together with a framed certificate to show off your awesome punditry to your colleagues and friends. Just email your own prediction (a score out of ten to two decimal places), and this special keepsake could be yours… or you could just spend it!

 

Politics versus economics – this month the economics won

There have been two opposing forces at war in the UK for a while now. Pulling the Accountagility Index (AAX) down is anxiety about Brexit, which is reaching fever pitch in the current febrile political climate. Keeping the score up on the other hand, is the surprising and reassuring underlying strength of the UK economy.

This month the economics won and pushed the Index back into the black from 4.97 to 5.03. The Accountagility Index (AAX) records UK political and economic health in a score out of ten. Any score below 5.00 is negative. It’s a small move of just six basis points, but a strategic one. The Index has been underwater for three months, and has now surfaced for the first time since November 2018. It’s encouraging to see a move back into positive territory.

What caused the rise this month?

The lowest inflation numbers indicate that we are now past the peak of higher inflation that has prevailed for the past two years. That view is supported by other factors. In the construction sector, input cost pressures have eased significantly. Markets and sterling rose over the past month, whilst the tax intake in January helped the UK debt ratio to drop, which is always an encouraging development.

Of course the political environment continues to befuddle commentators. Most indicators fell, but at least for now the economic factors have won out.

Indeed an economy-only version of the Index shows a March score of 5.86, one of the highest such scores since the Brexit vote!

What happens next?

This reading was taken on the 11th March, before the important series of Commons motions of 12-14th March around Brexit, so please bear that in mind. The most likely outcome is a delay in the Brexit process, so fans of the Brexometer can relax – it may be with you for a while yet.

As to next month, as we pierce the veil of the exit date of 29th March 2019, what on earth will be happening on the other side in Early April? How will the Index look then?

Keep following the Brexometer to find out.

Footnote

Last month we set up a competition open to everyone, to predict this month’s score. The winner is Cristina Richiardi, who was spot on with her reading of 5.03! Well done Cristina who wins the special prize of a Brexometer tenner with the serial number starting AA – one of the first new plastic ten pound notes ever printed. Would you like to join in next month? There is another crisp Brexometer ten pound note to win, together with a certificate to show off to your colleagues and friends. Just reply to david.west@accountagility.com with your own prediction (a score out of ten to two decimal places), and a special keepsake could be yours… or you could just spend it!

Good news and bad news fought out a 5-5 draw

After the excitement of the past two months, when the Brexometer has been jumping up and down like a mouse on a trampoline, this month sees a more stable situation. The reading has risen by just two basis points from 4.95 in January, to 4.97, a small rise, but still below the parity level of 5.00.

The Accountagility Index (AAX) records UK political and economic health in a score out of ten. Any score below 5.00 is negative.

For good news junkies, if the Index was just based on economic factors alone, it would be standing at 5.68 today, up by seven basis points this month, well ahead of the pre-vote benchmark of 5.45, and at a very healthy level.

What caused the fall this month?

Five factors went up this month and five went down. On the upside, the biggest mover was the surge in the markets. With the FTSE 100 breaking back through the 7,000 barrier. Inflation is rapidly coming back under control, with the much-maligned RPI measure seeing 30 basis points carved off. Meanwhile, the aspect of the economy that is viewed by economists as the single most significant measure of health, employment, stands at a record high. So most of us are in work and what’s more, average earnings are rising. Let’s all be happy for that.

What else has been happening?

There were also five factors that fell however. The biggest one was sentiment, as all three UK sectors suffered from Brexit fear. The previously buoyant Services sector, for example, is now only just in the black at 50.1, the lowest reading since the Referendum. The worst segments are Transport and Communications, and Financial Intermediation. Manufacturing is the best sector, but even this has been dug to Brexit concerns; firms are building stocks in the event of a no-deal exit. In Construction, the mid-term expectation is still positive (a net 25% of firms expect a good year in 2019), but there has been a loss of momentum across the board. The watchword in all sectors is wait-and-see.

What happens next?

Last month we warned that the rise in last month’s Index should be celebrated cautiously. The tiny rise this month bears out that advice. Over the coming month, we will know what Parliament will do about the deal, including the so-called Malthouse Compromise, as votes have now been promised on the different options. It is however highly likely that the date of exit will be moved backwards in the next month.

So long as the current situation prevails, one thing is certain; the Index (AAX) will continue at similar levels to today until some certainty emerges. How will the talks between Theresa May and Jeremy Corbyn impact the score? Will a solution be found for the Irish Backstop? Will the EU and UK leaders have anything nice to say about each other? How will all of this affect the score?

Keep following the Brexometer to find out

Footnote

There has been so much interest in all things Brexit, and the Brexometer, that we had a competition amongst the Accountagility team this month. The closest prediction to the actual reading won a special Brexometer tenner. Congrats to Sarwat (our documentation Queen) who got within a mouse’s whisker with her guess of 4.95. Next month would you like to join in? I have an even more special prize, a Brexometer tenner with the serial number starting AA, one of the first new plastic ten pound notes ever printed. Just reply to this email with your own prediction (a score out of ten to two decimal places), and a special keepsake could be yours… or you could just spend it!

Paradoxically, economic good news has prevailed over parliamentary perplexity

The utter rout of Theresa May’s Brexit deal has been the big news of the moment. So you might expect the tumult and confusion in the Houses of Parliament to be driving the Accountagility Index (AAX) down this month. But the Brexometer is a blend of political and economic factors, giving a balanced measure of the UK’s health. And over the past month, seven economic factors have risen, pushing the Index up 18 basis points from December’s reading of 4.77 to the current level of 4.95.

The Accountagility Index (AAX) records UK political and economic health in a score out of ten. Any score below 5.00 is negative.

The very idea of good news at the current moment is shocking in itself. Whilst the political factors have been falling, the underlying economy remains resilient. If the Index was just based on economic factors alone, it would be standing at 5.61 today, well ahead of the pre-vote benchmark of 5.45

What caused the fall this month?

Although the impact of both the lack of leadership and the possibility of a no deal Brexit (now factored in at 70%) depressed the Index by ten basis points, there were seven reasons to be cheerful. A further drop in inflation, a sharp uptick in inward investment, and an increase in the FTSE 250 Index were the leading factors behind the economic improvement. But there were also modest increases in debt, growth and sterling. Lastly, sentiment increased in two of the three sectors, Services and Manufacturing. It is worth drilling down into the January sentiment picture. In Manufacturing, fear of a no deal Brexit was behind a sizeable increase in stockholding, but there were some good export wins seen, partly as a result of the weaker pound. Despite a small fall in sentiment, Construction experienced greater optimism due to expectations of some big ticket infrastructure programmes this year, mainly in transport and energy. The bright spots in Construction were civil engineering and residential building. Across all sectors, cost pressures are easing, which is better news for hard pressed businesses trying to restore profit margins.

Overall, this is a far better picture that you might imagine from the news. Looking forward, should we celebrate?

What happens next?

Last month we feared that the Index would continue to suffer whilst the political uncertainty prevailed. Since there is no short term light at the end of this particular tunnel, what will happen in February? Will Brexit fears bring the economic factors lower? Or will a possible deferment of the Brexit date beyond 29th March 2019 move sentiment, markets and investment upwards? What about the possibility of a General Election? What impact would that have on the Index? Perhaps our celebrations of this month’s good news should be muted.

Find out what happens next.

Footnote

There has been so much interest in all things Brexit, and the Brexometer, that we had a competition amongst the Accountagility team this month. The closest prediction to the actual reading won a special Brexometer tenner. Congrats to Sarwat (our documentation Queen) who got within a mouse’s whisker with her guess of 4.95. Next month would you like to join in? I have an even more special prize, a Brexometer tenner with the serial number starting AA, one of the first new plastic ten pound notes ever printed. Just reply to this email with your own prediction (a score out of ten to two decimal places), and a special keepsake could be yours… or you could just spend it!

UK Climate worsens with no clear way ahead for Brexit deal

Over the last month, the Brexit weather becomes more overcast, with the House of Commons vote on Theresa May’s deal suspended due to evident lack of support from MPs. Almost every day has seen a storm, with the deal being attacked from all sides and the EU leadership maintaining a hard line. The result is that numerous options have been mooted; from a new Referendum, to re-negotiation with the EU, or even a confidence vote leading to a General election. At least there is one option off the table; the challenge to May’s leadership of the Conservative party has been seen off, giving a year’s grace before another one.

The Accountagility Index (AAX) records UK political and economic health in a score out of ten, and this month the political metrics have been a key factor in driving it to its lowest level since August 2016, just after the vote. It has dropped to 4.77, a fall of 35 basis points from the November score of 5.12. This is the largest monthly change in the Index since September 2016 and the first time it has plunged into the red since the summer of 2017. Any score below 5.00 is negative.

What caused the rise this month?

Although the impact of both the political turbulence and the Mexican standoff of the Brexit deal took their toll on the Index, it was the resulting large falls in the UK markets that had the most damaging impact this month. Other changes in December were the ongoing pressure on sterling, and a small rise in unemployment. Sentiment held up quite well within this uncertainty, with the Construction sector recording a four-month high and adding jobs. This was from new work, mainly from the residential construction. There was a rise in Manufacturing sentiment, but export orders have been hit by Brexit turmoil. The important Services sector is growing at a snail’s pace, with subdued business and consumer spending. Pressure on UK households has intensified this month too.

What happens next?

Last month we correctly predicted a fall in the Index unless a breakthrough in the Brexit deal was observed. This downward trend will surely continue until some clarity emerges. Will the Commons vote go ahead soon? Can it get through? Will the EU come out more strongly to support it? And how will all this confusion impact the health of the UK?

Keep following the Brexometer to find out.

On the cusp of a dream or the edge of the cliff?

Over the last month, the Brexit situation has floundered, with the House of Commons vote on Theresa May’s deal suspended for evident lack of support from MPs. Almost every day has seen a storm, with the deal being attacked from all sides and the EU leadership maintaining a hard line. The result is that numerous options have been mooted; from a new Referendum, to re-negotiation with the EU, or even a confidence vote leading to a General election. At least there is one option off the table; the challenge to May’s leadership of the Conservative party has been seen off, giving a year’s grace before another one.

The Accountagility Index (AAX) records UK political and economic health in a score out of ten, and this month the political metrics have been a key factor in driving it to its lowest level since August 2016, just after the vote. It has dropped to 4.77 , a fall of 35 basis points from the November score of 5.12.This is the largest monthly change in the Index since September 2016 and the first time it has plunged into the red since the summer of 2017. Any score below 5.00 is negative.

What caused the rise this month?

Although the impact of both the political turbulence and the Mexican standoff of the Brexit deal took their toll on the Index, it was the resulting large falls in the UK markets that had the most significant impact this month. Other changes in December were the ongoing pressure on sterling, and a small rise in unemployment. Sentiment held up quite well within this uncertainty, with the Construction sector recording a four-month high and adding jobs. This was from new work, mainly from the residential construction. There was a rise in Manufacturing sentiment, but export orders have been hit by Brexit turmoil. The important Services sector is growing at a snail’s pace, with subdued business and consumer spending. Pressure on UK households has intensified this month too.

What happens next?

Last month we predicted a fall in the Index unless a breakthrough in the Brexit deal was observed. This downward trend will surely continue until some clarity emerges. Will the Commons vote go ahead soon? Can it get through? Will the EU come out more strongly to support it? And how will all this confusion impact the health of the UK?

Keep following the Brexometer to find out

Theresa’s dancing to ABBA propped up a disappointing month’s stats

There were several worrying signs in the UK economy over the past month, as growth stuttered, inflation increased and markets suffered. But the blip given to the sense of stronger leadership by the Prime Minister’s positive performance at the Conservative Party conference acted as a counter-weight, aided by some better mood music coming out of Brussels on the likelihood of a Brexit deal.

Overall, the UK suffered a small drop in September, with the Brexometer showing a reading of 5.25. This is a fall of four basis points from the August score of 5.29. The October score of the Accountagility Index (AAX) is still ahead of the pre-Brexit benchmark of 5.18, but a way behind the record high of 5.43 seen in July. The Index records UK political and economic health in a score out of ten, and any score above 5.00 is positive

What caused the rise this month?

The most substantial contributor to the fall was the sharp drop in the UK market indices, with both the FTSE 100 and 250 at their lowest levels since April. Then there was an increase in inflation, spurred by oil price rises as well as the weakness of the pound. UK growth was also a little lower at 1.22%, whilst sentiment in the Services and Construction sector fell off slightly.

Is it all gloom and doom for the UK then?

If the underlying details are sifted and explored, a very mixed and contradictory picture emerges, as has been the case ever since the Brexit referendum. For example, there are some rather surprisingly positive shards of light in business sentiment. Job creation was up in the important Services sector, new business volumes in construction are rising as the fastest rate since late 2016, with a higher number of apprentices and trainees observed, and Manufacturing exports recovered, led by orders from the US and Europe.
And then there are upbeat reports of a breakthrough in the Brexit talks, although the details of the deal remain shrouded in mystery, and the crucial Irish border conundrum is yet to be solved.
Lastly there was an encouraging further rise in inward investment, which has been increasing solidly for the past 20 months.

What does all this tell us?

The Brexometer is a dispassionate measure of a passionate time. Looking at the distinct factors figuratively, however, reveals an image of the UK as a sailing ship, whose passage in good winds is being held back by the drag anchor as signified by the uncertainty of the Brexit deal. In other words, once the deal is done, the underlying resilience and strength of the UK economy could propel HMS Britain forward powerfully.

Over the next month, the Brexit negotiations may reach some kind of conclusion, with a EU conference later in November being held ready to approve it from the European end. After that, could the deal, whatever it is, get through the Houses of Parliament? As the ship continues to make heavy weather, how will the Index react? Can it hold up during a choppy month, or will it all continue to drop?

Keep following the Brexometer to find out.

The sunny summer just throws shadows into sharper relief

The UK enjoyed a modest but surprising lift in August, with the Brexometer showing a reading of 5.29. This is a climb of six basis points from the July score of 5.23. The September score of the Accountagility Index (AAX) is now well ahead of the pre-Brexit benchmark of 5.18, but below the record high of 5.43 seen in July. The Index records UK political and economic health in a score out of ten, and any score above 5.00 is positive.

What caused the rise this month?

The most substantial contributor to the rise was the reduction to 4.0% in the unemployment figures, a continuing trend. The recent messages coming from the two main negotiators, Michel Barnier and Dominic Raab, have struck a slightly more positive tone about a Brexit deal in some form. Plus, we have seen better news on growth, inflation and the debt ratio. Finally, the important services sector saw an increase in business activity and new work.

Why do we need to fasten our seat belts then?

There are warning bells sounding around industry expectations, with the state of the totally becalmed manufacturing sector being at the heart of the concerns. Confidence and activity are both at a two year low, with hardly any job creation. One might have expected exports to be robust, given the weaker pound, and the sector is not now expected to contribute to UK growth throughout this third quarter.

A renewed slowdown in the construction sector has been observed, with a drop in civil engineering projects evidence of the lack of major infrastructure programmes.

With the drop in the markets, a perceived global weakness in demand, and the turbulence of the political scene, we are in for a bumpy ride over the next two months.

Next month, the Brexit negotiations are in full swing, and the headlines will be all about each twist and turn. How will the Index react? Can it maintain its level in September, or will it be victim to the Brexit headlines?

Keep following the Brexometer to find out.

What makes up the Accountagility Index (AAX)?

The data used to calculate the Accountagility Index are based on eleven key factors, all derived from a diverse range of independent and credible sources​

• UK economic growth – A key building block of UK prosperity
• Markets – Reflects the health of larger British companies
• UK inflation – An important measure which needs to be carefully monitored
• Sterling strength – Affects imports, exports and confidence
• UK employment – Impacts so many aspects of UK economic activity
• UK Debt ratio – Tracks the UK’s progress against long term balancing of the books
• FDI (Foreign Direct Investment) – Illustrates the practical confidence levels from outside the UK
• Sentiment – Can be often the most important factor in how the economy is perceived
• Political stability/environment – A must include measure which can have instant impact on the big picture
• Progress on Brexit negotiations – Casts a very long shadow over all things
• Progress of International trade talks – A vital indicator of the UK’s international positioning

Brexit negotiations entered into their final phase last month, with the sides as far apart as ever. The uncertainty has had a significant impact on the Index this month, causing a fall of 20 basis points to 5.23. Last month’s reading was a post-referendum peak of 5.43. Nonetheless, the August score of the Accountagility Index (AAX) is still ahead of the pre-Brexit benchmark of 5.18. The Index records UK political and economic health in a score out of ten, and any score above 5.00 is positive.

August Brexometer Reading

The most substantial contributor to the fall was the impact of the lack of clarity and common purpose in the Brexit negotiations, with EU Chief Negotiator Michel Barnier indicating the EU’s rejection of key components of the UK’s most recent proposal. This stand-off was certainly not helped by the radio silence coming out of the informal talks between Theresa May and Emmanuel Macron, implying that France is entirely supportive of the EU’s tough stance. The recent warning by the normally equable Mark Carney, Governor of the Bank of England, has also sounded warning bells about a no-deal exit. The political factors contributed to almost half of the drop this month.

The Accountagility Index Rating for August

There were other factors too. Inflation remains stubbornly high and there are ongoing cost pressures throughout the economy. Growth is a worry, but Q2 figures may be more encouraging. There are signs of a run on the pound in this climate, when holidays cause trading volumes to be low, and this would have further negative effects on medium-term inflation. Sentiment is lower this month, although the construction sector is racing ahead with the fastest rise since 2015. House building is the star, which is good news for UK plc.

Next month, Parliament is back from its summer recess but the news during August will be full of the Brexit negotiations. How will the Index react? Can it recover during the silly season, or will it all continue to drop?

Keep following the Brexometer to find out.

What makes up the Accountagility Index (AAX)?

The data used to calculate the Accountagility Index are based on eleven key factors, all derived from a diverse range of independent and credible sources​

• UK economic growth – A key building block of UK prosperity
• Markets – Reflects the health of larger British companies
• UK inflation – An important measure which needs to be carefully monitored
• Sterling strength – Affects imports, exports and confidence
• UK employment – Impacts so many aspects of UK economic activity
• UK Debt ratio – Tracks the UK’s progress against long term balancing of the books
• FDI (Foreign Direct Investment) – Illustrates the practical confidence levels from outside the UK
• Sentiment – Can be often the most important factor in how the economy is perceived
• Political stability/environment – A must include measure which can have instant impact on the big picture
• Progress on Brexit negotiations – Casts a very long shadow over all things
• Progress of International trade talks – A vital indicator of the UK’s international positioning