Brexit ‘schadenfreude’ gathers hope from slide in sterling

Irish exporters may be feeling the pain of another Brexit-related slide in sterling but one group who won’t exactly be crying into their cornflakes are economists, who have been predicting havoc will strike the EU-exiting Brits from the get-go.

Their barely concealed schadenfreude has, until now, been stymied by the gravity-defying UK economy, which has refused to succumb to the gloomy predictions attached to June's shock referendum result.

Consumer spending, business activity, house prices and wage growth have all defied forecasts, while unemployment remains near an 11-year low of 4.9 per cent. Exports also appear to be benefiting from a weaker pound.

This has left economists, many of whom spectacularly failed to predict other big events, most notably the 2008 crash, railing against the heavens like some tribe of drought-ridden farmers praying for rain.

Their prayers were partially answered on Sunday, with Theresa May’s pledge over article 50 triggering another shuddering drop in the value of sterling.

Her promise to begin exit negotiations in March sent the pound to a three-decade low against the dollar and a three-year low against the euro. This will inevitably cut the purchasing power of the British consumer. Does this signal that Britain will finally face paying the price for following a fringe of the Tory party off the Brexit cliff?

Strong demand

Maybe. Or maybe not. It came as the UK’s latest manufacturing PMI (Purchasing Managers’ Index), the ultimate bellwether of business investment, showed British factories had their strongest month in more than two years in September. Consumer goods producers came out best, reflecting continued strong demand from households, while export orders rose at the fastest rate since January 2014.

The barometer was so far ahead of predictions that it has raised doubts about whether the Bank of England and the UK finance ministry will announce more stimulus measures to offset the predicted hit from Brexit.

Cranky economists have responded to the recalcitrant British metrics by insisting the blowback from Brexit won’t come the until the deferred investment decisions leach into the real figures and sour consumer sentiment.

For now at least, Project Fear hasn’t morphed into Project Reality.