The U.K. economy may finally be set to start feeling the effects of Brexit.

After many forecasters were wrong-footed by its resilience after June's referendum, Bank of England policy maker Ian McCafferty is among those to foresee a "slow-motion slowdown'' in 2017.

Economists predict consumers will face faster inflation, importers will see higher costs and companies will prove more reluctant to invest as the government begins the process of withdrawing from the European Union, Bloomberg's Jill Ward reports.

The Bank of England already said on Wednesday that companies are hoarding cash as they become more cautious, while data last week revealed inflation pressures building and employment falling for the first time in more than a year.

"Ultimately the economic forecasts for next year and the years beyond depend heavily on the choices that politicians make," said Rob Wood, a former BOE economist now at Bank of America Merrill Lynch.

Indicators released overnight were a mixed bag. The Confederation of British Industry reported its index of growth in the private sector rose to the highest in a year, driven by the strongest performance in manufacturing in more than two years. By contrast, GfK’s measure of consumer confidence remained in negative territory in December, although it rose to minus 7 from minus 8.

Windows into Brexit Cost

Brexit’s cost is hitting close to home as Prime Minister Theresa May’s Cabinet Office has been forced to negotiate with Microsoft to minimize the impact of a looming price hike that could cost the government hundreds of thousands of pounds, Bloomberg's Thomas Seal reports.

In October, Microsoft announced the cost of its cloud services would go up by 22 percent in 2017 to "harmonize" its prices across Europe following the sharp fall in the pound. Sterling has plunged 17 percent against the dollar, the currency in which Microsoft books its revenues, since Britons voted to leave the EU.

According to Freedom of Information requests submitted by Bloomberg, the company is now in negotiations with the Common Technology Services division of the Cabinet Office, which coordinates the prime minister’s office with other departments and the civil service.

The division "is negotiating with Microsoft in order to secure a pan-governmental commercial advantage for the purchase of some of these licenses," the Department for Business, Energy and Industrial Strategy said.

Brace of Bad News

Britain had a bad day in Europe’s top court on Wednesday.

An opinion by its advocate general may create an important Brexit precedent after she said that ratification by EU institutions isn’t enough to pass a trade deal with Singapore.

The ruling that member states must also approve the accord with the Asian city state means May might have to negotiate with 27 other national parliaments and in some cases their regional lawmakers if she wants a wide-ranging trade agreement with the bloc. That may challenge her claim that a commerce pact can be wrapped up in the two years it takes the U.K. to leave the EU.

Then, in its first major judgement of the Brexit era, the court said U.K. measures forcing telecommunications companies to hold customer data for a year violate the bloc’s laws.

Such legislation “exceeds the limits of what is strictly necessary and cannot be considered to be justified within a democratic society,” judges said.

May has made removing the U.K. from the oversight of the court one of her Brexit objectives. Ironically, the challenge was originally brought in the U.K. by Conservative Party lawmaker David Davis, who now serves as Brexit secretary.

On the Markets

Europe saw more than $380 billion in deals for its companies this year, according to data compiled by Bloomberg. That was a 46 percent increase from a year ago with the falling pound making British targets more attractive

And Finally…

How would Father Christmas have voted in June’s referendum?

Sixty-three percent of those asked by YouGov said he would have sought to remain in the EU with 38 percent saying he would have backed Brexit.

"Presumably this is an acknowledgement of the importance of ‘freedom of movement’ in enabling Santa to perform his Yuletide activities," said pollster Matthew Smith.