With the UK still reeling after the Leave campaign successfully secured the referendum vote, the country’s economic and political climate has experienced a mixture of progression and ambiguity. Within hours of the announcement, global financial markets plummeted, with the pound falling to it’s lowest point since 1985 – twice as low as it fell during the 2008 economic recession.
EU investors and traders panicked, spurred on by the likes of the IMF, and soon began pulling out of deals to ensure their finances did not suffer during the turmoil. However, the UK quickly demonstrated that pulling investment was not necessary, and that many sectors could benefit from Brexit in the long term.
The IMF has predicted that global growth will be 0.3 percent lower than predicted in January, whereas UK growth will be down 1.7 percent
Glimmer of hope
Despite the initial worry, global financial markets quickly stabilised – much faster than expected. Markets have rebounded around the globe, led by the sectors that have suffered the most, such as banking and oil production. As promised by the Leave campaign, Britain has started to explore free-trade deals with international markets such as India and China – one of the UK’s biggest inward investors. Chancellor Phillip Hammond has started discussions with China on an ambitious free-trade deal, which could see greater access for major Chinese banks and businesses to the UK economy, according to the BBC.
A very long way to go
In spite of such marginal gains, however, the UK still has a long way to go before it could possibly be suggested that leaving the EU was a good move for the economy. While the immediate repercussions are still bubbling away, the IMF has predicted that global growth will be 0.3 percent lower than predicted in January, whereas UK growth will be down 1.7 percent.
Companies based in the UK with close ties to Europe have threatened to move their businesses to EU countries. The loss of huge corporations such as Vodafone, which has warned it will move its head office if the post-Brexit UK does not offer freedom of movement for people, capital and goods, could hit Britain’s economy hard.
There has also been huge pressure from the sciences, which are primarily funded by the EU. Those within the industry have to voiced concerns over the impact on funding in light of the Brexit vote. Seven major UK science academies, including The Royal Society and The Academy of Medical Sciences, have signed an open letter warning that there have been immediate implications, and calling for assurances from the UK government.
Moreover, a recent preliminary purchasing manager’s index of the UK manufacturing and service sectors shows that activity across the sectors contracted in July at the steepest pace since early 2009. Chris Williamson, Chief Economist at Markit, the firm that compiled the data, told CNBC that the figures showed a “dramatic deterioration” in the UK economy.
Ultimately, the UK still has a lot of reassuring to do, especially for those industries that have been hit the hardest. They will need to convince critics that Brexit was a positive move, both economically and politically, as the weight of evidence currently suggests the exact opposite. Indeed, the short-term effects are discouraging, though it remains possible that the long-term effects could be promising for the UK’s future.