Commentary: Monetary and fiscal policy normalisation as Brexit is negotiated

Having been one of the fastest growing advanced economies ahead of the EU referendum in June 2016, the UK economy is now beginning to slow as others pick up the pace (figure 1). The UK economy is estimated to have grown by 1.5 per cent in the year to the third quarter of 2017. This growth rate represents a material loss of momentum from annual rates of GDP growth of around 2 to 3 per cent achieved in the years leading up to the referendum. Productivity growth has also slackened off and output per hour appears to have been flat or falling. Moreover, largely because of the significant depreciation of sterling that accompanied the decision to leave the EU, household real incomes have fallen over the same period. According to the ONS, real household disposable income per head fell by 1.1 per cent in the year to the second quarter of 2017; this was the fourth consecutive quarterly fall in this measure of real income and the longest period of consistent negative growth since the end of 2011.