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Effects of Brexit on the UK Economy

Date January 16, 2017

Effects of Brexit on the UK Economy

Brexit or British exit from the European Union has not only affected the UK economy but also other areas like house prices, politics and markets. The economists are of the opinion that the UK’s decision to leave the EU has given rise to an atmosphere of uncertainty. While some effects might be short-lived or temporary, some economic impacts have been huge so far. The IMF or International Monetary Fund had estimated a 0.1% reduction in the world economic growth following this major event in the history of the UK. Some experts have argued that separation from the EU would be beneficial in the long run because now there wouldn’t be any contributions made to the Union that would help decrease taxes.

The structural uncertainty that now prevails has to be resolved by the government in order to determine the future of the sterling. There are predictions that the sterling might collapse to parity with the US dollar if the UK government doesn’t act within a given time frame. Currently, the biggest challenge is the absence of a functioning government and effective opposition.

There were speculations revolving around before the referendum that the UK would vote to remain a part of the European Union. The results of the recent referendum that made the UK leave the EU were totally unexpected, especially for the economists. That is why spending decisions have been put on hold by the investors and the house price boom has come to a sudden standstill. An online survey done recently reveals that a sharp waning has been recorded in the number of people searching for UK properties on the internet.   

At the same time, people who have been wanting to come to the UK for settlement have started looking for bargain homes since the value of the pound has decreased. As a result, flight bookings have surprisingly increased during this period. Many businesses have reduced their investments and some big names have taken their share out. A 10% downfall in investments has been reported when compared to the figures of the previous fiscal year.   

However, despite these negative effects of Brexit on the economy, one thing that is still the same as it was before the referendum is consumer spending. Shoppers are still found at their favourite stores and they seem to be totally unperturbed by this huge development in the history of the UK.   

On the whole, there have been positive as well as negative effects of Brexit on the UK economy. Some short-term impacts have been predicted to settle down on their own. But there have also been some losses to the economy done that have long-term effects. Now there would be no access to the single market and the investments into the country have decreased. As a result, the EU will be paid for tariffs on exports; goods that have to be sent to countries that are part of the European Union. New trading relationships will have to be formed and all these changes will take time.        

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