The economic effects of Brexit were the main areas of debate during the Referendum on EU English membership, and the debate continued after the vote of Leave. There is broad consensus among economists and in the economic literature that Brexit is likely to reduce the per capita real level of UK income.
The remaining supporters, including the British treasury, argue that being in the EU has a strong positive effect on trade and as a result UK trade will be worse if leaving the EU. Advocates of withdrawal from the EU argue that termination of net contributions to the EU will allow tax cuts or increased government spending.
Video Economic effects of Brexit
Contribution to EU
Withdrawal supporters argue that ending net contributions to the EU will allow tax cuts or increased government spending. Based on Financial figures, in 2014, the UK's gross domestic contribution (ignoring discounts) was  £ 18.8 billion, about 1% of GDP, or Ã,  £ 350 million a week. Because the UK receives (per capita) EU spending less than other member countries, rebates are negotiated; net of this rebate, its contribution is  £ 14.4 billion, about 0.8% of GDP, or Ã,  £ 275 million a week. If EU expenditure in the UK is also taken into account, the average net contribution for the next five years is estimated to be around Ã,  £ 8 billion a year, which is about 0.4% of the national income, or Ã,  £ 150 million per week. The Institute for Fiscal Studies notes that the majority of Brexit's predicted impact on the UK economy indicates that the government will have less money to spend even if it no longer has to pay to the EU.
Maps Economic effects of Brexit
Single market
According to Paul Krugman, the Brexiteers statement that abandoning a single market and a customs union could boost UK exports to the rest of the world is wrong. He considers Brexit costs probably about 2 percent of GDP.
Securities on trade and economy
Most economists, including the UK Department of Treasury, argue that being in the EU has a strong positive influence on trade and as a result UK trade will be worse if leaving the EU. The survey of leading economists showed a remarkable agreement that Brexit is likely to reduce the per capita real level of UK income. A 2017 survey of existing academic literature found "the research literature shows a broad consensus that in the long run Brexit will make Britain poorer as it will create new barriers to trade, foreign direct investment and immigration, but there is substantial uncertainty. the effect, with reasonable cost estimates ranging from 1 to 10 percent of per capita income in the UK. "These estimates differ depending on whether the UK remains in the European Single Market (eg, by joining the EEA), establishing free trade agreements with the EU, or return to trade rules governing relationships between all members of the World Trade Organization. Before the referendum, the British treasury predicted that leaving the EU would be bad for UK trade.
On August 10th the Institute for Fiscal Studies published a report funded by the Council on Economic and Social Research which warned that Britain faced some very difficult choices because it could not maintain the full EU membership benefits while limiting EU migration. IFS claims the cost of reducing economic growth will cost the UK about Ã, Â £ 70 billion, over Â8 billion savings in membership fees. It does not expect a new trade deal to make a difference.
On January 5, 2017, Andy Haldane, Chief Economist and Executive Director of Monetary and Statistical Analysis at the Bank of England, said the BoE's own forecasts predicted an immediate economic slowdown because the referendum results were inaccurate and recorded strong market performance soon after the referendum, though some prices go up faster than wages. Haldane said the estimate was only inaccurate in his short-term assessment, and over time, Brexit would jeopardize economic growth. London School of Economics economist Thomas Sampson notes that it is difficult to assess the impact that the transition process will have on Brexit.
Foreign direct investment
European experts from the World Pensions Council (WPC) and the University of Bath have stated that, apart from short-term market volatility, Britain's long-term economic prospects remain high, especially in the attractiveness of countries and foreign direct investment (FDI): "Risk expert the country we spoke to was convinced that the UK economy would remain strong in terms of getting out of the EU.'The appeal of the British economy will not go down and the trade war with London is not attractive, 'said M Nicolas Firzli, director-general of the World Pension Board (WPC) and advisory board member for the World Bank's Global Infrastructure [...] Bruce Morley, an economics lecturer at the University of Bath, goes so far as to argue that the long-term benefits to Britain leave the Union, such as less regulations and more control over UK trade policies, could greater than the short-term uncertainty observed in the [country risk] scores. "
The debated interest in UK membership in the EU as a lure for FDI has long been emphasized by supporters of continued UK involvement in the European Union. In this view, foreign firms see Britain as a gateway to other EU markets, with the UK economy benefiting from the attractiveness it generates as a location for activity. England is clearly the main recipient of FDI. In 2014, the company holds the second largest share of foreign investment in the world, amounting to more than Ã,1 trillion or nearly 7% of the global total. This is more than double the 3% recorded by Germany and France. Per capita, the UK is a clear front-runner among major economic countries with FDI stocks about three times larger than rates in other major European countries and 50% larger than in the US.
Property market
The BBC reported on April 28, 2017 that the company's investment firm JLL (company) data showed Asian investors accounted for 28% of transactions in the UK property market in 2016, up from 17% a year earlier - suggesting that Brexit did not disband Asian property investors. The BBC also cites the international property portal Juwai.com, which reported a 60% increase in demand to UK property in the previous 12 months. The CBRE Group property company said in January 2017 that Brexit has increased its risk in the UK property market by creating new uncertainties.
Stock and currency markets
When the London Stock Exchange opened on Friday 24 June, the FTSE 100 fell from 6338.10 to 5806.13 in the first ten minutes of trading. It rebounded to 6091.27 after 90 minutes further before further recovering to 6162.97 in late trading today. This is equivalent to a 3% fall in the close of trading. When the market reopened on the following Monday, the FTSE 100 showed a steady decline, losing more than 2% by mid-afternoon. After opening later on Friday after the referendum, the Dow Jones Industrial Average fell nearly 450 points, or about 2.5% in less than half an hour. The Associated Press called the stock market suddenly in this world suffered a setback in the stock market. Internationally, more than US $ 2 The wealth gains in equity markets are erased in the one-day highs recorded in record history, in absolute terms. Stock market losses totaled $ 3 trillion on June 27; until the same date, the FTSE 100 index has lost Ã, Â £ 85 billion. Ahead of the close of trading on June 27, the FTSE 250 index focused locally down about 14% compared to the day before the results of the referendum were published.
However, on July 1 the FTSE 100 has risen above the pre-referendum level, to a 10-month high. Taking into account the previous fall, this is the biggest one-week gain since 2011. On July 11, it formally entered the bull market area, after rising more than 20% from its February low. The FTSE 250 moves above the pre-referendum level on 27 July. In the US, S & amp; P 500, a broader market than the Dow Jones, reached its all-time high on July 11.
On the morning of June 24, the pound sterling dropped to the lowest level against the US dollar since 1985, marking the pound down 10% against the US dollar and 7% against the euro. A drop from $ 1.50 to $ 1.37 is the biggest step for the currency in a two-hour period in history. The pound remained low, and on July 8 became the worst-performing currency this year, against 31 other major currencies, performing worse than the Argentine peso, the previous lowest currency. In contrast, the pound weighted trade index only returned to levels seen in the period 2008-2013.
The results of the referendum also have direct economic effects in a number of other countries. South Africa's Rand suffered its biggest one-day decline since 2008, falling more than 8 percent against the dollar. Other negatively affected countries include Canada, whose stock markets are down 1.70%, Nigeria, and Kenya. This is partly due to the shift in global finance out of risky currencies and into the US dollar, and partly because of concerns about how UK withdrawal from the EU will affect the economies and trade relations of countries with close economic ties with the British Empire.
However, in September 2016 the British media have reported that ignoring the so-called 'Project Flaws', has rewarded shareholders who ignored related pessimism, after the FTSE250 broke all records in the months after the referendum.
On January 5, 2017, Andy Haldane, Chief Economist and Executive Director of Monetary and Statistical Analysis at the Bank of England, acknowledged that forecasts predict the economic downturn caused by the referendum has so far been inaccurate and recorded strong market performance since the referendum.
Economy and business
On June 27, United Kingdom Treasury Secretary George Osborne sought to convince financial markets that the UK economy is not in serious trouble. This comes after the media reported that a survey by the Institute of Directors suggested that two thirds of businesses believe that the results of the referendum will produce negative results as well as fall in sterling and FTSE 100. Some UK businesses also predict that investment cuts, freezes and redundancy will be needed to counter the results referendum. Osborne pointed out that Britain faces a "future of force position" and there is no current need for an emergency Budget. "No one doubts our determination to maintain the fiscal stability that we have conveyed to this country.... And for companies, big and small, I would say this: the UK economy is essentially strong, very competitive and we're open to business."
On July 14, Philip Hammond, Osborne's successor as Chancellor, told BBC News the results of the referendum had caused uncertainty for the business, and that it was important to send "guarantee signals" to encourage investment and spending. He also insisted there would be no emergency budget: "We will want to work with the governors of the Bank of England and others during the summer to prepare for the Autumn Statement, as we will signal and set plans for advanced economies in very different situations now we face, and then the plan will be implemented in the Budget in spring in the usual way. "
It is expected that the weaker pound will also benefit the aerospace and defense companies, pharmaceutical companies, and professional services firms; the share price of these companies was encouraged after the EU referendum.
On July 12, global investment management firm BlackRock expects the UK to recession in late 2016 or early 2017 as a result of a vote to leave the EU, and economic growth will slow for at least five years due to a reduction in investment. On July 18, the UK-based economic forecast group, the ITEM EY club, suggested the country would experience a "short shallow recession" because the economy suffers from "a severe confidence effect on spending and business"; it also cut its economic growth forecast for the UK from 2.6% to 0.4% in 2017, and 2.4% to 1.4% for 2018. The group's main economic adviser, Peter Soencer, also believes there will be long-term implications , and that the UK "may have to adjust to permanent reductions in economic size, compared to likely trends before voting". Senior Investor City Richard Buxton also believes there will be a "mild recession". On July 19, the International Monetary Fund (IMF) reduced its 2017 economic growth forecasts for the UK from 2.2% to 1.3%, but still expects Britain to be the second fastest growing economy in the G7 during 2016; The IMF also reduced its forecast for world economic growth by 0.1% to 3.1% in 2016 and 3.4% in 2017, as a result of the referendum, which is said to have "thrown a wrench in the work" of the global recovery.
On July 20, a report released by the Bank of England said that although uncertainty has risen "markedly" since the referendum, it has not seen evidence of a sharp economic downturn as a consequence. However, about a third of the surveyed contacts for the report predicted there would be "some negative impact" during the next year.
In September 2016, after three months of positive economic data after the referendum, commentators suggested that many of the negative statements and predictions promoted from within the "fixed" camp had failed to materialize, but in December, the analysis began to show that Brexit had an effect on inflation.
Financial institutions
On the day after the referendum, Bank of England Governor Mark Carney said at a press conference:
The capital needs of our largest banks are now 10 times higher than before the financial crisis. The Bank of England has tested these banks with stress on scenarios that are much more severe than our current state. As a result of this action British banks have raised more than Ã, Â £ 130bn of new capital and now have over Ã, Â £ 600bn of high quality liquid assets. That's huge capital and great liquidity gives banks the flexibility they need to continue lending to UK businesses and households even during challenging times In addition, as a barrier to support market functioning, the Bank of England is ready to provide more than £ 250 billion of additional funds through its normal market operations. The Bank of England is also capable of providing substantial liquidity in foreign currency if required. We expect institutions to take advantage of this funding if and when appropriate It took some time for England to build new relationships with Europe and the rest of the world. So some markets and economic volatility can be expected because this process is revealed, but we are ready for this. His Majesty Treasury and the Bank of England have been involved in extensive contingency planning and chancellery and I remain in close contact including through the evening and this morning. The Bank of England will not hesitate to take additional measures as needed, as the market adjusts.
Nevertheless, the share price of the five largest banks in the UK dropped an average of 21% the morning after the referendum. Shares in many other non-UK banks also fell by more than 10%. In late Friday trading, both HSBC and Standard Chartered have fully recovered, while Lloyds, RBS Group and Barclays remain down more than 10%. All Big Three credit rating agencies react negatively to the vote: Standard & amp; Poor's cut Britain's credit rating from AAA to AA, Fitch Group cutting from AA to AA, and Moody slashed Britain's prospects to "negative".
To improve financial stability, on July 5 the Bank of England released Ã, Â £ 150 billion in loans with reduced countercyclical capital buffer to be held by banks.
Concerns about the decline in commercial property values ​​led investors to redeem investments in property funds, prompting Standard Life to stop withdrawals on July 4, and Aviva following it the next day. Other investment companies include Henderson Group and M & amp; G Investments cut the amount to be received by investors in their funds. In the weeks that followed, suspension of assignments by some companies was lifted, replaced with an exit sentence, and the exit sentence was reduced in a row.
On October 4, 2016, Financial Times assessed Brexit's potential impact on banks. The city of London is the world's leader in financial services, especially in foreign currency transactions, including the euro. This position is enabled by the EU-wide "passport" agreement for financial products. If the passport agreement expires at the time of the Brexit, the UK financial services industry may lose up to 35,000 of its 1 million jobs, and the Treasury may lose 5 billion pounds per year in tax revenues. Indirect effects can increase these figures to 71,000 job losses and 10 billion pounds tax every year. The latter will correspond to about 2% of the UK annual tax revenue.
In July 2016 the Berlin Senate has sent a letter of invitation encouraging UK-based startups to be resettled in Berlin. According to Anthony Browne of the British Banking Association, many large and small banks can move out of the UK.
Company asset management
But the situation may be different when it comes to the fund management industry, as owners of UK assets, especially UK pensions, are often an incomparable part of total turnover for European asset managers, Germany, France, the Netherlands and others.
This imbalance has the potential to give Britain some of the influence of negotiations, for example, the strength of retorsions in the case of the EU trying to impose the sudden cancellation of the mutually binding obligations and market-related profits in the Financial Instrument Instrument 2004 ( "passport funds" ). Research conducted by the World Pensions Council (WPC) shows it
"Assets owned by UK pensions are more than 11 times larger than all German and French pension funds put together. [...] If necessary, at the first sign of threat to the City of London, His Majesty's Government must be in a position to respond very strongly. "
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At the end of July 2016, the IMF released a report warning that "'Brexit' marks materialization of significant downside risks to global growth," and that considering the current uncertainty about how the UK will leave the EU, there is "still so much more and more unfolding results negative is a clear possibility ".
G20 finance minister
Held in late July 2016 in Chengdu, China's meeting of finance ministers from 20 major economies warned that the UK's planned departure from the European Union added to the uncertainty in the global economy and urged Britain to remain a "close partner" with the EU to ease the turmoil. While the G20 agrees that other world factors, including terrorist acts, create problems, Brexit is at the forefront of their concerns.
In an interview while attending the G20 Summit, Philip Hammond, newly appointed United Kingdom Minister of Finance, said the country will seek to minimize the uncertainty by explaining in the near future "clearer types of arrangements we imagine will advance with the EU" in the near future. He stressed that "uncertainty will only end when the deal is done" but hopes that Britain and the EU will be able to announce some agreement by the end of 2016 on how the exit will be staged. Hammond also reaffirmed previous Government comments suggesting that measures will be taken to stimulate the economy including tax cuts or increased spending, albeit without specifics. Britain is also planning to increase bilateral trade with China, he told the BBC. "Once we get out of the EU then I have no doubt on both sides we will want to strengthen that relationship into a stronger structure in a proper bilateral way."
Although he not only overcame the UK's departure from the European Union, Mark Carney, chairman of the Financial Stability Board (and the Governor of Bank of England), sent a letter at the end of July 2016 to the Minister of Finance attending the G20 Summit and to the Central Bank of the Governor on the difficulties the global economy has passed including the Brexit effect) and the steps taken by the FSB. The letter shows that the financial system has "continued to function effectively" regardless of "spike in uncertainty and risk aversion," confirming that "this resilience in the face of stress demonstrates the lasting benefits of post-G20 crisis reform." He emphasized the value of the special reforms that the Financial Stability Board has held that it has "damped the aftershocks of this event [of the world crisis] rather than strengthening them". He expressed his belief in the FSB strategy: "Resilience in the face of this pressure demonstrates the lasting benefits of post-G20 crisis reform."
References
Source of the article : Wikipedia
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