“Forecasts from [the Treasury] said immediately after the vote to leave in the referendum there would be a minus, there would be a reduction in the size of the British economy in the last quarter and the current quarter. What happened? We were one of the fastest growing nations in the G7 in that time.”
David Davis, 1 June 2017
“David... just this week it’s been revealed that we have plummeted as a country from the fastest-growing economy amongst developed economies to the slowest in a three-month period”
Nick Clegg, 1 June 2017
Mr Davis’s basic point is correct. The Treasury’s forecasts for the impact of a vote to leave didn’t reflect how the economy performed after the vote to leave the EU. He’s not correct on the specific timings, although he may have just mis-spoken.
HM Treasury, the department which oversees government spending, forecast last year that a vote to leave the EU would result in a year-long recession, beginning in the third quarter of 2016.
But in the third quarter of 2016 the UK was the third fastest-growing economy in the in the G7, a group of ‘major advanced economies’. In the fourth quarter it grew the fastest. That ran counter to the expectations of most economic forecasts made before the referendum.
Then, as Mr Clegg points out, in the first three months of this year the UK dropped in the rankings. It joined Italy and the USA as one of the three slowest-growing economies in the same group—not the single slowest as Nick Clegg says. The Office for National Statistics hasn’t published estimates for months after that yet.
So the debate now isn’t about whether the Treasury’s forecasts were a bad guide to what happened immediately after the vote (they were) but whether it was mainly the timing they got wrong.
A survey of professional economists run by the Financial Times in January 2017 found that the majority weren’t reassured by the apparently solid performance of the UK economy since the vote to leave the EU. Some took this view despite conceding that many of the short-term forecasts had been overly pessimistic.