Is the Brexit vote the new millennium bug?

The Guardian /Stephen Boyle (chief economist at NatWest) — Do you remember Y2K? The millennium bug? For the benefit of younger readers, fears grew during the 1990s that, because of how we programmed computers, the dawn of 2000 would lead to catastrophes of all sorts. Planes would fall from the sky and power stations would switch themselves off.

Yet precisely nothing happened as we waved goodbye to 1999 and said hello to 2000.

When the UK voted to leave the EU, sterling fell sharply and is now 10% below its value in the first three weeks of June. That makes us worse off: it costs more to buy stuff from abroad, whether that’s French cheese or foreign holidays. Already, the effect on business costs is evident with input prices rising in July for the first time since 2013. In an otherwise low inflation environment, many businesses have little pricing power so margins are squeezed.

There have also been declines in commercial real estate prices and some property funds erected barriers to people wishing to withdraw money.

Little of this is good news. But no economic planes have fallen from the sky and no economic power stations have turned themselves off.

On the contrary, while surveys said consumer confidence had collapsed, Britain appears to have spent July at the shops. And we were not browsing: retail sales volumes were 1.4% higher than in June, strong growth by any standard. Surveys also said that hiring had ground to a halt. Yet the number of people claiming unemployment-related benefits fell in July.

So will Brexit turn out to have been a latter-day Y2K? Some of the claims of the immediate economic consequences of voting leave have been unfounded, but it is too early to declare peace.

Car sales and mortgage applications hint that people are pausing when it comes to big purchases. Among the more reliable surveys, such as that conducted by the Bank of England’s agents, there are signs of businesses taking stock before committing to investment. Economic performance could yet dip.

Concerned that the worst would come to pass, the Bank of England has acted decisively. While that will blunt any immediate adverse consequences of the leave vote, the more meaningful effects will happen later and demand a different type of response.


The National Infrastructure Delivery Plan is replete with sound projects. We know that fixing local road networks and adding to aviation capacity will deliver large benefits. It is essential, too, to invest in people – especially the very young – and in innovation in a plan for growth.

The vote to leave was partly a rebellion against the adverse effects of trade and open borders: we are better off on average but many people lose. Exiting the EU might slow migration and, thus, the rate of growth of demand for public services and housing. However, migration will not turn negative or the population stop rising.

So far, the economic consequences of voting leave have been modest. But the race has not been run. It has only started. Winning that race needs a plan for growth.