Removal of uncertainty boosts the Index
A clear General Election result takes the Brexometer to new heights
One of the most dramatic movements in the Brexometer saw the Accountagility Index (AAX) rising 69 basis points to 5.68, from 4.99 last time, following the news of a sweeping Conservative victory in the UK General Election.
Whilst the economic score was more or less unchanged from November, the political news caused the Index to rise to a record high. This movement is the second largest recorded since the Brexometer measurements started in June 2016.
See below for more detailed analysis, or watch an interview (with our Brexometer guru David West laying out the context.
What caused the index to go up this month?
The key influence was the removal of uncertainty in the UK political arena, with an 80 seat majority creating a level of stability not seen in recent times. Whilst there are new factors to consider for the future, such as the trade talks with the EU and the friction that will occur after the SNP’s successes, there is little doubt that the UK will exit the EU before 31st January 2020.
What about the economy?
There were risers and fallers in the economic scene over the past month, but with the nation’s focus on the Election, these factors cancelled themselves out. In pure economic terms, the Index rose one basis point only from 5.78 last month, to 5.79. Inflation fell, the Pound rose, the markets climbed a little over the month, but government debt rose slightly and sentiment fell, with activity in the important Services sector falling below the parity level of 50.0 (to 49.3). A similar fall was observable in the Manufacturing sector, whereas construction rallied albeit from a low base. Overall sentiment was still negative ahead of the result, with Brexit and electoral uncertainty the chief culprits.
What happens next?
The next Brexometer measurement will be taken on Friday 10th January 2020, when we will all be in a New Year of a new decade. By then the impact of the Election will be better understood, as will the timetable for exiting the EU. Or will the UK have passed the legislation by then? What new announcements will Boris Johnson have made? How will the removal of uncertainty affect business confidence? What new developments will occur in the discussions of the trade talks with the EU? Will Nicola Sturgeon have made a move regarding indyref2? How will the economy react? Keep following the Brexometer to find out.
The Brexometer was calculated on 13 December 2019.
Article written by David West, sales and marketing director, Accountagility.