Real income recovery to spur spending

In our base case, which is predicated on a Brexit deal being secured and the UK entering into a status quo transition period, a further rise in real earnings should spur a recovery in consumer spending growth. As a result, we expect real spending growth to pick up from a likely 1.6% this year, to around 2.0% by 2020. This is significantly higher than the consensus expectation of 1.5% by 2020. In contrast, if there were a “no deal” Brexit, we estimate a hit of between 1 and 3ppts to consumer spending growth in 2019, depending on the scenario.