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The British economy might have slowed amidst the political uncertainty, yet, with the political stabilization now, and GDP growth gradually solidifying due to the narrowed foreign trade deficit, there is a foundation for improved economic expansion supported by appropriate policy action.

The British economy might have slowed amidst the political uncertainty, yet, with the political stabilization now, and GDP growth gradually solidifying due to the narrowed foreign trade deficit, there is a foundation for improved economic expansion supported by appropriate policy action.

Economy is facing stronger headwinds due to the rising uncertainty in the Brexit process. However, a slowdown in manufacturing and construction, along with the dismal growth in salaries and wages and the rising inflation, might impair the UK's growth outlook.

In April, UK manufacturing and construction slowed down, marring the 2Q17 broader growth projections. Since the Brexit vote last year, a robust expansion in these two sectors had allowed to offset the challenges of the plunging pound sterling's FX rate and lower household disposable incomes. 

UK manufacturing rose by just 0.2 percent in April, and so did broader industrial sector, which includes mining and utilities, according to a report by the Office for National Statistics (ONS). UK construction declined by 1.6 percent that same month as a result of weaker fixed investment in real estate development.

Manufacturing was mainly hit by the rebound in the pound's FX rate, affecting the British exports, whilst construction took a blow from the pre-election uncertainty, hampering investment. Now that the UK's political reality has barely changed after the election, as long as the Tories are able to form the government with the DUP, investment is poised to rebound, but manufacturing might still struggle.

The British manufacturers are calling on the government to intensify their effort to boost labor productivity rather than relying on the national currency's fluctuations in supporting the domestic industries.

The government must "fix the foundations of the UK economy and our productivity problem," Carolyn Fairbairn, Director-General of the Confederation of British Industry said.

At the same time, longer-term fundamentals indicate the UK economy is still on track to expand further, and April's slowdown might have been only a reflection of the pre-election uncertainty.

Moreover, given now the Tories will have to coordinate their policies with Ulster's DUP, a ‘hard Brexit' scenario is unlikely — Northern Ireland voted to ‘Remain' in the Brexit referendum last year, and in order to ensure the stability of the parliamentary majority, the Conservative Party will be more cautious in their approach to the Brexit process.

Whilst the uncertainty in the British economy is still rife, the worst times might have passed, with the inflation projected to stabilize, and broader GDP expansion steadily gaining momentum. In the absence of political shocks expected in the near-to-medium-term, the economy will be greatly dependent on the Tories' ability to maintain a stable working relationship with the DUP within the new cabinet.

source: https://sputniknews.com/europe/201706111054522879-uk-economy-post-election/