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After The Brexit Vote, Why Has The U.K. Economy Proved So Resilient?


Tomorrow, Britain's prime minister, Theresa May, will begin revealing her plan for one of the biggest upheavals in the United Kingdom in decades. We're talking about Brexit. Now, before voters decided last summer to leave the European Union, many economists were warning that a vote for Brexit was a vote for a recession. But as NPR's Frank Langfitt reports from London, the U.K. economy is holding up surprisingly well.

FRANK LANGFITT, BYLINE: Just before last June's vote, there was a chorus of doom.


FORMER PRIME MINISTER DAVID CAMERON: The experts warn us we will have a smaller economy, less employment, lower wages.


GEORGE OSBORNE: The financial leaders of the world's biggest countries have given their unanimous verdict, and they say that a British exit from the EU would be a shock to the world economy.


WILBUR ROSS: I think if it were to leave, it would be the most expensive divorce proceeding in the history of the world and the most complicated as well.

LANGFITT: Those were the warnings from the then U.K. Prime Minister David Cameron and George Osborne, who served as Britain's treasury secretary. The American you heard speaking on Bloomberg TV was Wilbur Ross. He's now Donald Trump's choice for commerce secretary. But since then, the economic picture here has been much rosier.

CHRIS WILLIAMSON: If we look at the second half of the year, we've probably grown by just over 1 percent.

LANGFITT: That's Chris Williamson. He's chief business economist at IHS Market. That's an information and analysis firm.

WILLIAMSON: So not just defying a recession but actually doing quite well.

LANGFITT: Williamson says the economy has defied the naysayers because consumers remain confident and continue to spend.

WILLIAMSON: New car registrations is one area where we've seen surprisingly strong growth. We're also seeing the housing market picking up, people making major purchases on investments in the home as well.

LANGFITT: The economists haven't been entirely wrong. As most predicted, the British pound did plunge. But that's also made British products a lot cheaper on the global market, which, as Williamson points out, has been a boon to factories here.

WILLIAMSON: You're seeing a wide variety of manufacturing firms benefiting. Producers of car parts here in the U.K. who would normally just service the domestic U.K. market, but with the exchange rate now, they're finding that their parts are very competitively priced to firms in other countries.

LANGFITT: So does this mean smooth sailing for the U.K. economy? Most economists say no. For instance, the drop in the pound has sparked inflation, making imports more expensive and hurting people's pocketbooks. Simon Kirby points out that some companies are jacking up their prices. Kirby's with the National Institute of Economic and Social Research, an independent think tank.

SIMON KIRBY: The latest Apple laptops, they have already increased in price by a few hundred pounds over the last couple of months. So the pass through for Apple consumers has been very, very quick.

LANGFITT: Why? Why so much so fast?

KIRBY: Apple has taken the view that this is a permanent change in the exchange rate, so they're going to adjust their prices already.

LANGFITT: Economists expect more pain to come. After all, Brexit hasn't even started yet. It will take at least two years for the U.K. to leave the EU, a single market of half a billion people and the U.K.'s biggest trading partner. Kirby says the relative economic calm won't last.

KIRBY: There's a, I would say, pause before the storm, but it's perhaps a bit too strong a word to call the next few years a storm, although some might disagree of that depending on who it is that's losing their jobs.

LANGFITT: As the economic consequences of Brexit play out over the decades, Kirby thinks he and other economists will ultimately be proven right. Frank Langfitt, NPR News, London.

(SOUNDBITE OF JULIA KENT'S "FLICKER") Transcript provided by NPR, Copyright NPR.

Frank Langfitt is NPR's London correspondent. He covers the UK and Ireland, as well as stories elsewhere in Europe.