Brexit has humiliated Britain’s failed economic soothsayers

Article by Kwasi Kwarteng

The Trojan prophetess, Cassandra, was given powers of foresight by Apollo, the Greek god of culture, in a bid to seduce her. She refused him and, as one version of the legend goes, he spat into her mouth to inflict a curse that no one would ever believe what she said.

She prophesied doom and bad times ahead, but nobody believed her. Her prophecies all came true.

Last year, by contrast, a large number of economists predicted doom and gloom, if the UK voted to leave the EU. Our modern Cassandras predicted an “immediate shock”, not as a consequence of Britain leaving the EU in 2019, but rather as an instant result of the referendum. An “immediate shock“ does not relate to an event three years into the future.

George Osborne’s so-called punishment budget was threatened to mitigate the devastating impact a vote for Brexit was supposed to inflict immediately on our economy. It was not a budget for 2019. The Bank of England predicted a recession, not in 2019, but in 2016. Many City economists foretold the same thing.

Of course, nothing happened. While it is true that sterling depreciated, the economic forecasts of recession in 2016 were all proved false. The Bank of England has undergone the humiliation of revising not only its growth figures for 2016, but also upgrading its 2017 forecast from 1.4 per cent to 2 per cent. This new revision is understood to be the biggest upward correction the Bank has made to its economic growth forecast in recent years.

Andy Haldane, the Bank’s chief economist, has now thrown his hands up in the air and cast doubts on economists’ ability to get these predictions right. The problem, however, is with the nature of economics itself.

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