Brexit, it would appear, is beginning to hit hard. Manufacturing output contracted 3.9% m/m in April: car production tumbled 24.0% m/m and the boost from stockpiling has faded. The services sector has hit a soft patch too: the 3m/3m annualised rate dipped to just +0.16% in April. The labour market report for the same month showed a material deceleration in jobs growth. Employment is only holding up due to rising self-employment. Vacancies have turned lower.
The April labour market report also contained preliminary Q1 2019 estimates for workforce jobs, broken down by industry. In Q1 2018, ‘tech services’ employment growth had ground to a standstill. It was tempting to link this to an impending Brexit: jobs would quickly shift abroad as the end date neared.
The y/y was still only +0.28% in Q3 2018 but has recovered strongly over the last two quarters, rebounding to +3.21% in Q1 2019. The actual q/q change in ‘tech services’ employment was +100k q/q in the first quarter of this year, the largest quarterly rise since Q2 2014.
These core UK industries are perhaps more immune to Brexit than is commonly believed. The UK has, over the years, built up strengths in ‘professional, scientific & technical’ services and ‘information & communication’. Indeed, new data show that the UK created 13 new unicorns – privately-owned tech companies valued at over $1bn – in the last year alone. Only the US and China surpass the UK in creating this many fast-growing global tech companies.
