UK manufacturing figures are a reality check for Brexit ‘broptimists’

The strong British economic growth figures for the second quarter of this year published last week led some of the pro-Brexit London media to talk up the outlook after the Leave vote. Monday’s revision to figures for UK manufacturing, showing expectations in July had deteriorated even more rapidly than initially estimated, should put a stop to this avoidance of reality.

The UK economy will take a Brexit hit in the short term for sure – the only question is how much. All eyes this week will be on updated economic estimates from the Bank of England, due on Thursday, and on what the UK central bank plans to do about it.

Bank of England governor Mark Carney (pictured) has already pointed to the risk of at least a technical recession – two successive quarters of negative growth. So the bank's estimates are expected to cut growth to close to zero or slightly below for the next couple of quarters.

Even closer attention will be paid to what the Bank of England does. It is expected to cut UK base interest rates from their current 0.5 per cent, though like all central banks its problem is that rates are already so low that the impact of a further cut is debatable. Other options include reintroducing a scheme which provides banks with cheap funding for loans, or increasing asset purchases under the bank’s quantitative easing programme.

There are two implications here for the Irish economy. The first is that the slowing UK economy is likely to affect exporters. The other immediate implication is that sterling is likely to remain weak, adding to pressures Irish exporters face, as highlighted in the latest analysis by Ibec, the employers’ body.

The immediate implications of Brexit for Ireland’s exporters is worrying. Beyond that, of course, is the small matter of the huge “unknown unknowns” about the future trading relationship between the UK and the European Union and what this will mean.