The United Kingdom has established March 29th as a firm date for the start of Brexit. However, while Article 50 will trigger on this date, formal negotiations with the European Council may begin as late as June. The process is expected to take around two years and should be complete by March 2019.
Despite political uncertainty, the U.K economy remains resilient on the back of strong export-driven manufacturing and unexpected strength in the real estate market. Britain is outperforming the rest of Europe on many key metrics.
As the Pound declined, British Exports soared. And this is likely to continue as British exports take market share from competitors like Germany and Switzerland.
Producers who previously ignored Britain may look to move production back in response to the increased competitiveness caused by the Pound's Brexit-driven decline. Britain's surging exports will strengthen the currency over time.
Retail sales are not taking the low Pound kindly. The weakness in consumption is not necessarily the result of higher prices but rather weak consumer confidence. Britain's collapsing consumer confidence is due in part to political uncertainty and weak wage growth.
The British inflation rate is growing. But so far it is not out of line with the European average. The problem is wages. While British wage growth is still strong, the growth rate is declining. Wages will need to grow faster than inflation going forward or British consumers will soon feel the pressure of rising prices.
Conclusion
The United Kingdom's economy is resilient in the face of Brexit. Exports are surging in response to the weak pound; this trend is likely to continue and eventually drive the currency upwards.
However, the picture is not entirely rosy. Retail sales are in decline due to higher prices and weak consumer confidence. Inflation is not a big problem yet, but if wages don't grow fast enough, British consumers may feel their purchasing power erode due to inflation.
