The uncertainties of the UK’s Brexit negotiations with the remaining 27 EU member states are weighing heavily on the UK economy. The 2 years of negotiations will not even begin until notice is served under Article 50 and the procedure as to how Article 50 can be triggered will be the subject of a Supreme Court decision expected later this month.

In the Financial Times’ annual survey of 120 economists published on 2 January 2017 (“FT Survey”), the majority of economists expect UK growth will slow markedly in 2017, household incomes will be squeezed by higher inflation and businesses will hold back on investment decisions because of uncertainty about Brexit. The depreciation of sterling is likely to lead to inflation and whilst it is good news for British exporters, imported goods will become more expensive. As wages are likely to rise more slowly, most economists predict this will hold back consumer spending (which has fuelled UK growth in 2016) and will detrimentally affect retailers.

The Bank of England’s current base rate of interest is 0.25%. In the FT Survey, the majority of economists predict interest rates to stay at this very low rate (or even go down further) for the rest of 2017 and even until the end of this decade. That may be good news for corporate borrowers and many homeowners with a mortgage who will find it easier to service their loans, but it is a negative for savers who are getting a very poor return on their savings.

The low interest rate has meant that many consumers have been happy to borrow to finance their spending. According to new statistics from the Bank of England, consumer borrowing increased at its fastest rate for more than a decade during December 2016 – consumer credit rose by £1.9bn during December and in the past year has grown by 10.8 per cent in total. This is likely to result in people living beyond their means, which is one of the leading causes of consumer bankruptcy.

Another effect of the Brexit vote can be seen on real estate prices. Industry leaders say there will be no return to the rapid rises in commercial and residential property prices that dominated the UK market in the two years to the end of 2015. There were fears of an immediate crash after the referendum in June 2016 as there was a precipitous drop in share prices for housebuilders and real estate investment trusts but confidence is slowly returning. Housebuilders’ share prices, which slumped 37 per cent immediately after the Brexit vote, are now 15.6 per cent below pre-referendum levels; real estate investment trusts, which shed 22 per cent, are now only 10.6 per cent lower.

Property markets are going to be affected by lower transaction levels as people take a more cautious approach to moving home in the weaker economic environment. Companies are subletting as much commercial space as they can to reduce overheads in anticipation of tough times to come. There is also less demand for rental homes in London as EU executives are uncertain whether they will be able to remain living and working in the UK once the UK leaves the EU. This is all likely to put pressure on estate agencies and those involved in the property market.

So, how might the above predictions affect the Restructuring & Insolvency profession? R3, the trade body for UK Insolvency Professionals, recently undertook a survey of its members. The overwhelming majority of insolvency and restructuring experts who responded believed that the UK’s decision to leave the EU would lead to an increase in corporate insolvencies in 2017 and had already hurt businesses’ finances.

Whilst there may be some upsides to Brexit, the negotiations for new and better trade deals with the US and non-EU countries cannot begin until the UK actually leaves the EU, which is 2 years after the Article 50 notice. In that 2 year period, the UK faces levels of uncertainty which will challenge the UK economy, British industry and services. Continuing low interest rates and the tolerant attitude of the Banks means that the uncertainty is unlikely to lead to a big increase in formal insolvencies although we may well see a rise in restructuring in the UK during 2017.