Britain’s economy is on course for a strong start to 2020 after Boris Johnson’s general election victory ended Brexit uncertainty, according to a new financial survey.
A lack of clarity over exactly when the UK will leave the EU has beset the business world ever since the original Brexit vote in June 2016.
But Mr Johnson’s crushing win at the ballot box in December which saw the Tories secure an 80-seat majority has ended that uncertainty with the UK now set to split from Brussels on January 31.
A newly published and closely watched monthly gauge of business conditions in the UK suggests that companies have responded quickly to the UK’s new political landscape.
The survey, conducted by financial information firm IHS Markit and the Chartered Institute of Procurement & Supply, found that the services sector stabilised in December.
It showed that order books had picked up and optimism had risen to its highest level in 15 months.
The services sector is particularly important because it accounts for around 80 per cent of the British economy.
The survey’s headline purchasing managers’ index – a broad measure of activity in the sector – rose to 50.0 points in December, up from 49.3 during November.
Though the index is not showing any growth – the 50 mark separates growth from contraction – the apparent rise in optimism, with the index heading in a positive direction, bodes well for the immediate future.
Tim Moore, economics associate director at IHS Markit, said: ‘The modest rebound in new work provides another signal that business conditions should begin to improve in the coming months, helped by a boost to business sentiment from greater Brexit clarity and a more predictable political landscape.’
Mr Johnson’s newly won majority in the House of Commons means Britain is now guaranteed to stick to the January 31 divorce deadline.
That means businesses can finally plan with certainty after previous deadlines were not stuck to and the UK remained stuck in Brexit limbo.
Meanwhile, economic growth could also be helped by the fact that after January 31 the UK will enter into a ‘standstill’ transition period with the EU until the end of 2020.
During that period the two sides will try to agree the terms of a future trading relationship.
The UK will stay in the EU’s existing economic arrangements, in theory providing businesses with at least 11 months of stability.
However, with the terms of the future partnership between Britain and the bloc yet to be hammered out, businesses do still face long term uncertainty.
Further signs of economic improvement emerged in new car sales figures, which showed a 3.4 per cent year-on-year improvement in December.
The lingering effect of the Brexit uncertainty was seemingly evident in the overall 2019 figures, which showed a 2.4 per cent decline to 2.31 million.
That was the weakest level since 2013 and 14.2 per cent below the 2016 peak, the year the country voted to leave the EU.