The document summarizes recent economic developments in the UK and globally. It notes that the UK economy saw negative GDP growth in Q2 2019, with manufacturing continuing to decline. PMIs indicate contraction in agriculture, manufacturing and services in September due to Brexit uncertainty. The global economy is also slowing, partly due to pressures in Germany and worsening US trade wars. M&A activity in the UK and US has declined amid ongoing uncertainties from Brexit and trade tensions.

1. FABIAN SOCIETY
October 2019
Economic Update

2. SUMMARY
RECENT ECONOMIC DEVELOPMENTS:
► The UK saw negative GDP growth confirmed in the second quarter of the
year (Q2) with manufacturing activity continuing to decline through the
summer.
► Purchasing Managers' Index (PMIs) indicate that agriculture,
manufacturing and services all contracted in September, with Brexit and
associated uncertainty cited in each case.
► The global economy is continuing to slow partly resulting from domestic
pressures in Germany and worsening US trade wars.
► M&A activity in both the UK and the US continues to decline.
LOOKING FORWARD:
► Trade tensions: The trade war between the US and China continues to
undermine confidence and hamper economic activity.
► Brexit: Uncertainty of the UK and European Union’s ability to secure and
agree a Brexit deal before the 31st October deadline and the possibility
of a No Deal Brexit as a result.
► European economy: The Eurozone is facing a challenging economic
outlook, exemplified by the ongoing difficulties faced by the German
manufacturing sector.
Fabian Society |YF Finance & Economics | 1

3. Main Economic Indicators
Indicator
Latest
change
6-month
trend
Comment
GDP growth -  No updated GDP data since last month.
Current economic
activity   Manufacturing and construction PMIs remained in contraction
territory, while the services PMI also dipped into contraction.
Business confidence -  There has been no significant change in business confidence
over the last few months.
Consumer confidence
(GFK / You Gov) change
 - Consumer confidence as measured by two major indicators
declined in September.
FTSE100/250  - The steady recovery since July was reversed by a sharp fall at the
end of September
Sterling / US Dollar - -
The pound recovered slightly on the reduced likelihood of a no-
deal Brexit, before being hit again by economic and political
uncertainty.
Brent crude prices - - No significant change in oil price in September as it fluctuated
driven by political and economic outlook.
UK 10yr Gilts   UK long term debt yields have continued to fall, along with similar
movements in Europe and the US.

4. -3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
2018 2019 2020 2021
GDP(YoY,%growth)
Oxford: No Deal Oxford: Baseline Capital: Repeated Delays
Capital: Deal Capital: No Deal S&P: Baseline
S&P: No Deal IMF Baseline IMF No border distruption
IMF Severe
Source : Oxford Economics, Capital Economics, S&P, and IMF
UK Brexit scenario forecasts, GDP growth
Fabian Society |YF Finance & Economics | 3
Brexit scenario narratives
Oxford Economics
► Baseline: Contingent on an orderly departure of the UK from the EU.
► No-deal: UK leaves the EU in a disorderly fashion in October 2019.
Capital Economics
► Deal: Assumes a Brexit deal is struck on 31 October 2019.
► Repeated delays: Assumes Brexit delayed repeatedly until the end of 2021.
► No-deal: UK leaves the EU without a trade deal on 31 Oct 2019.
Standard & Poor’s (S&P)
► Baseline: Orderly (though potentially delayed) departure from the EU and a
transition period until the end of 2020 Brexit.
► No-deal: Disorderly exit that limits UK access to EU markets or imposed
tariffs/nontariff barriers that reduces competitiveness.
International Monetary Fund (IMF)
► Baseline: Assumes a Brexit deal was struck in Q2 2019.
► No-deal: No-deal at the end of Q2 2019 with no border disruptions and a small
Noborderdisruptions increase in UK sovereign/corporate spreads.
► No-deal: No-deal at the end of Q2 2019 with significant border disruptions that raise
Severe UK import costs for firms/households and a more severe tightening in financial
conditions.
Comparison of Brexit scenario with other forecasters

5. Fabian Society |YF Finance & Economics | 4Source : Oxford Economics, Capital Economics, and Reuters
Despite the Prime Minister’s proposed Brexit deal the final outcome
remains illusive amid continuing political uncertainty
► Boris Johnson’s government has outlined its plans for a Brexit deal
with the European Union. It seeks to replace the Irish backstop
proposal in the plans agreed between Theresa May’s government
and the European Union, which were a key sticking point in her
attempts to achieve parliamentary approval.
► The latest plans would instead see the whole of UK – including
Northern Ireland – leave the EU’s customs union, but with Northern
Ireland retaining the EU Single Market’s regulations for goods.
► The pound recovered some of its value in September following the
government’s statement of intention to strike a deal.
► However, the latest indications from the EU suggest this proposition
has not been well received, with attention turning instead to the
likely length of a further extension to Article 50, prompting further
political uncertainty in the UK.
45%
35%
35%
31%
30%
25%
20%
18%
18%
18%
17%
17%
15%
15%
15%
14%
14%
5%
0% 10% 20% 30% 40% 50%
Bank of Montreal (October)
Capital Economics…
Reuters (median)…
Matchbook (October)
Goldman Sahs (September)
JP Morgan (October)
Paddy Power (October)
Boyle Sports (October)
Betfred (October)
Betfair (October)
Unibet (October)
Bet Victor (October)
Sky Bet (October)
Smarkets (October)
Betfair Exchange (October)
Coral (October)
Labrokes (October)
Danske Bank (October)
Probabiloty weightings
No-deal Brexit probabilities

6. -5%
0%
5%
10%
15%
20%
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Export Domestic
-0.3%
-0.2%
-0.1%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3
2018Q4
2019Q1
2019Q2
Quarterlygrowthrate
Source : ONS
The UK saw negative GDP growth confirmed in Q2, with manufacturing
continuing to contract through summer
UK real GDP growth, quarterly growth
Fabian Society |YF Finance & Economics | 5
UK manufacturing turnover, yearly growth

7. 42
44
46
48
50
52
54
56
58
60
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Services Manufacturing Construction
UK COMPOSITE GROWTH INDICATOR (Purchasing Managers Index,
50+ indicates growth)
Fabian Society |YF Finance & Economics | 6Source : CIPS/Markit
All three PMIs indicate sector contraction, with Brexit and associated
uncertainty cited in each case
► Manufacturing downturn
continued in September
with the longest period
below 50 since mid-2009.
► Construction activity
declines at second sharpest
pace since 2009.
► The services sector
contracted with the fastest
rate of job shedding since
2010.

8. $0bn
$10bn
$20bn
$30bn
$40bn
$50bn
$60bn
Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jul 2019
Exports Imports
Source: Destatis and US Census Bureau
Germany Index of New Orders in Manufacturing US Trade with China
The global economy is continuing to slow, with domestic pressures in
Germany, and US trade wars worsening
Fabian Society |YF Finance & Economics | 7
90
95
100
105
110
115
120
Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jul 2019
Total Domestic Non-Domestic

9. Source: Destatis and US Census Bureau
Different EU Downside scenarios
European ‘manufacturing virus’ is spreading amidst subdued inflation
Fabian Society |YF Finance & Economics | 8
►The probability of an economic recession in the Eurozone is rising rapidly amid weak foreign demand and an industrial recession in Germany that is
having a deeper and more long-lasting impact than expected.
►The monetary arsenal of a recent stimulus package deployed by the European Central Bank (ECB) could help to contain recession risks. However, the
lack of pre-emptive fiscal easing to accompany the ECB action raises the risk of recession next year, as external threats – Brexit, US tariffs on European
exports, escalating trade tensions – look unlikely to abate.
►Italy: Economy remains stagnant with GDP having managed to grow only in one of the last five quarters.
►Spain: Private consumption is expected to continue to slow as the pace of job creation eases.
►France: Has been the bright spot in the Eurozone picture with businesses in France increasing their staff numbers in September driven by robust private
consumption due to fiscal support, contained inflation and rising wages that will continue to help offset the external weakness.
Downside probability weightings for EU countries
0.0
0.5
1.0
1.5
2.0
2018 2019 2020 2021 2022
GDP-YoYGrowth(%)
Trade war escalation (EU market) Protracted eurozone slowdown (EU market)
US recession hits the global economy (EU market) No-deal Brexit (EU market)
EM upturn as trade war fears fade (EU market)
10%
15%
15%
20%
40%
0% 5% 10% 15% 20% 25% 30% 35% 40%
US recession hits the global economy (EU market)
No-deal Brexit (EU market)
EM upturn as trade war fears fade (EU market)
Protracted eurozone slowdown (EU market)
Trade war escalation (EU market)

10. Consumer confidence remains subdued relative to recent
years
► UK Consumer confidence from the two major surveys has continued a downward trend.
► Confidence levels reported by YouGov are at the lowest levels since 2013, while the GfK index has continued a negative run
___ from the start of 2016.
Fabian Society |YF Finance & Economics | 9Source: YouGov and GfK
-20
-15
-10
-5
0
5
10
90
95
100
105
110
115
120
YouGov/Cebr, Consumer Confidence Index GfK, Consumer Confidence Index

11. Source: Mergermarket
US: ANNOUNCED M&A DEALS*
UK: ANNOUNCED M&A DEALS*
* Lapsed / withdrawn bids are excluded
Mergers and Acquisitions (M&A) activity in the UK and the US declined
in Q3 amid uncertainty generated by Brexit and US trade wars
Fabian Society |YF Finance & Economics | 10
Recent UK M&A news:
► The owner of Paddy Power Betfair has
agreed to buy the company behind Poker
Stars in a $6 billion share deal to create the
world’s largest online betting and gambling
company by revenue, seeking to take
advantage of the opening up of U.S.
markets. (Source: Reuters.)
► Blackstone Group has struck a deal to buy
a portfolio of US industrial warehouses from
Colony Capital for $5.9bn, including debt,
furthering its bet on the continued growth
of e-commerce. (Source: Financial News.)
► Tokio Marine has agreed to buy US
insurance group Pure Group for $3.1bn, as
the fourth-largest property and casualty
insurer globally continues with its merger
and acquisition strategy. (Source:
International Investment.)
0
100
200
300
400
500
600
700
0
100
200
300
400
500
600
$bn
#
0
20
40
60
80
100
120
140
0
20
40
60
80
100
120
140
160
180
$bn
#
Total number of deals (announced) Value of deals for the past three months

12. THANK YOU
Lead author and economist
Amarvir Singh-Bal
Contributors
Contact address:
economynetwork@youngfabians.org.uk
Victoria Parrett
Policy & Parliamentary Liaison Officer