The UK economy is facing contrasting trends, with rising living standards due to falling unemployment and growing wages, but weakness elsewhere such as declining GDP growth, business confidence, and investment. Brexit uncertainty continues to hamper the economy unless a deal is reached. Global economic growth is also slowing due to factors like the US-China trade war and a cooling Chinese economy. The document provides several economic indicators and statistics demonstrating these recent economic developments in the UK and globally.

1. FABIAN SOCIETY
March 2019
Economic Update

2. SUMMARY
RECENT ECONOMIC DEVELOPMENTS:
• The UK economy is moving in two, contrasting directions,
simultaneously delivering rising living standards while the economy
appears to be otherwise weak:
• Growth, investment and business confidence have all continued
to fall in the wake of the Brexit Referendum
• Employment and wages have started to consistently grow leading
to a rise in living standards
LOOKING FORWARD:
• Brexit will, invariably, dominate all and we expect continued weakness
in the economy to persist unless and until a deal is reached. A No-Deal
Exit would be catastrophic for the UK economy.
• The Global economy has also started to weaken induced by a
slowdown in the Chinese economy and the continuing US-Chinese
trade war
Fabian Society |YF Finance & Economics | 1

3. Indicator Latest change 6-mth trend Comment
GDP growth   GDP growth slowed to its lowest level since 2012
Business confidence   A slowdown in sales growth, combined with rising labour costs, have
reduced profits & harmed business confidence.
Unemployment   Unemployment continues to fall, while employment continues to rise,
helping to support living standards
Wages   Real wage growth has finally returned to the UK economy and living
standards have begun to recover after a lost decade of wage growth
Inflation   Inflation has continued to fall as the post-Brexit depreciation of the
pound has dissipated
Sterling / US Dollar   Sterling has continued to fall against the dollar as worries over the
UK’s future trading relationship with the EU remains
MAIN ECONOMIC INDICATORS
Fabian Society |YF Finance & Economics | 2

4. Source : ONS
Falling GDP growth, including a 5% reduction in car manufacturing, only
held up by services sector
GDP growth, annual % change Contribution to Q4 GDP growth (%pts)
-0.2
-0.1
0
0.1
0.2
0.3
0.4
Services Production Construction
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
GDP,Annual%
Historic Data ITEM Club Winter 2019 OBR BoE
Fabian Society |YF Finance & Economics | 3

5. Inflation has continued to fall as the large Brexit-induced Deprecation
has fed through to prices
Fabian Society |YF Finance & Economics | 4
1.20
1.25
1.30
1.35
1.40
1.45
1.50
1.55
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2015
Q4
2016
Q1
2016
Q2
2016
Q3
2016
Q4
2017
Q1
2017
Q2
2017
Q3
2017
Q4
2018
Q1
2018
Q2
2018
Q3
2018
Q4
£/$ExchangeRate
InflationRate(CPI-%)
CPI £/$ Exchange Rate
Inflation & £/$ Exchange Rate
Source : ONS

6. UK COMPOSITE GROWTH INDICATOR (Purchasing Managers Index, 50+ indicates growth)
GROWTH
CONTRACTION
45
50
55
60
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18
Dec-18
Feb-19
Services Manufacturing Construction
Services, construction and manufacturing growth continued to fall in Q1
2019
Fabian Society |YF Finance & Economics | 5Source : CIPS/Markit

7. Source: Office for National Statistics
UK UNEMPLOYMENT RATE AND JOB VACANCIES REAL WAGES AND PRODUCTIVITY IN THE UK, 2006 Q1=100
0.96
0.97
0.98
0.99
1.00
1.01
1.02
1.03
1.04
1.05
1.06
2006Q1
2007Q2
2008Q3
2009Q4
2011Q1
2012Q2
2013Q3
2014Q4
2016Q1
2017Q2
2018Q3
2006Q1=1
Real wages Output per hour
0
1
2
3
4
5
6
7
8
9
400
500
600
700
800
2006
2008
2010
2012
2014
2016
2018
Unemploymentrate(%)
Vacancies(thousands)
Vacancies Unemployment rate
The UK labour market continues to do well while employment and wages
continue to rise
Fabian Society |YF Finance & Economics | 6

8. BUSINESS CONFIDENCE, INDEX* CONSUMER CONFIDENCE, INDEX*
Source: YouGov/CEBR
* Score over 100 means more consumers are confident than unconfident
-30
-20
-10
0
10
20
30
40
50
-30
-20
-10
0
10
20
30
40
50
Q32010
Q12011
Q32011
Q12012
Q32012
Q12013
Q32013
Q12014
Q32014
Q12015
Q32015
Q12016
Q32016
Q12017
Q32017
Q12018
Q32018
Q12019
Smallbusinessconfidenceindex
Businessconfidenceindex
ICAEW BCM (all businesses) Small Business Confidence Index
100
102
104
106
108
110
112
114
116
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
Consumer and Business Confidence continue to fall in the wake of the
Brexit Referendum
Fabian Society |YF Finance & Economics | 7

9. Source : uk.investing.com
UK: FTSE 100 AND 250
US: S&P 500
01 Jan 2017 = 100
Global stock markets have begun to recover
from a disappointing end to 2018 with positive
earnings releases in January including for GE
and Facebook
UK markets depressed in comparison to the
US due to continuing Brexit uncertainty.
90
95
100
105
110
115
120
125
130
135
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
FTSE 100 FTSE 250 S&P 500 100 benchmark
Global stock markets have begun to
recover from a fall in Q4 2018
Fabian Society |YF Finance & Economics | 8

10. Global growth forecasts cut by IMF as China and
Euro area continue to slow
• The IMF has reduced its global growth forecast from 3.7% to
3.5% for 2019, the second downward revision in three months.
• The reduction is driven by the escalation of the trade dispute
between the US and China, worsened sentiment in Italy, and
the introduction of new fuel emission standards in Germany.
The government shutdown in the US may also contribute to a
reduced Q1 2019 GDP.
• The Euro area saw just 0.2% QoQ growth in the last quarter of
2018, with 1.2% growth from Q4 2017. This has likely been
impacted by various idiosyncratic events, including emission
standards in Germany, falling demand and higher borrowing in
Italy, and protests in France.
• Growth in the Chinese economy fell again to 6.6% in 2018 at
the slowest rate in 28 years, with reporting in the country
suggesting it may further fall to 6.0% in 2019.
ECONOMIC GROWTH
Fabian Society |YF Finance & Economics | 9
-3%
-1%
1%
3%
5%
7%
9%
11%
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
2015Q1
2015Q3
2016Q1
2016Q3
2017Q1
2017Q3
2018Q1
2018Q3
China Eurozone European Union World

11. Source: Mergermarket
US: ANNOUNCED M&A DEALS*
UK: ANNOUNCED M&A DEALS*
* Lapsed / withdrawn bids are excluded
0
50
100
150
0
50
100
150
200
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19
$bn
No.ofDeals
Number of Deals Value for 3 months
0
200
400
600
800
0
100
200
300
400
500
600
$bn
No.ofDeals
UK M&A activity fell to lowest level in recent years, while the US
maintains a steady trajectory
Fabian Society |YF Finance & Economics | 10
• The CMA is expected to report on the results of their
delayed decision whether the Sainsburys and Asda
merger can go ahead.
• HMV was acquired by Canadian retailer Sunrise
Records in early February for an undisclosed
amount in a last minute deal.
• The collapsed cake chain Patisserie Valerie has a
number of interested bidders including Sports Direct,
Costa Coffee and Caffé Nero.
• The London Stock Exchange is to buy a 4.92% stake
in Belgian clearing house Euroclear for £243m.

12. THANK YOU
Authors
Amarvir Singh-Bal
Gregory Gillette
Jeevun Sandher
Contact address:
economynetwork@youngfabians.org.uk