British economy for short term correction then set for sustained growth
British Economy – The British voters spoke out about their position on the country’s membership in the European Union. 52% of them voted to Leave while 48% voted to Stay. As the country readies to exit the Union, speculation is all over concerning the impact of Brexit.
While looking at the effects, it is wise to consider both short-term and long-term outcomes.
British economy – Short-term impact…
The financial markets are the starting point for the Brexit effect. A financial shift needs only a night for it to effect while the economic shift is something gradual. Of course Britain is still a member of the EU today, just as it was yesterday. Employees can still continue working without having to worry about passports until the exit happens.
After the vote results, there was a worldwide stock market decline. Hear this truth; that should not concern you a bit. The FTSE 100 index measures the British stock market. On Friday afternoon, it was down by 3.2% but still recording a higher figure compared to the mid-June levels. That means investors do not think the Brexit will cause losses in corporate profits in the future.
But the British pound was 7.6 percent lower than the US dollar, a move to be considered seismic. The British government bonds equally slid, and thus may open the doors for inflation. This will result in exports from the nation being competitive, at least for some time.
British economy – Medium impact of Brexit…
As months go by, the effect of Brexit on the financial markets will fade away. The focus will be turned to the economy. Businesses will start to debate whether to make capital investments or hire people. As companies dwindle waiting for clarity, there will be months of economic activity silence.
Britain may enter into recession for a short while due to unstable confidence in business and increase in uncertainty.
British economy – Long-term effect of Brexit
Factors such as market swings and business confidence will affect the British economy for short and medium terms. However, looking into the future it is the bigger forces that carry the day.
And this is where post-EU comes in. Britain will have negotiated the necessary trade partnerships. The confidence of doing business will come back and the financial markets stabilize. Britain will likely choose the Iceland or Norway method of operation to survive outside the EU and make partners all over the world. The two countries are not part of the Union but trade freely in the bloc.
Chances are that Britain will out-live the immediate financial turbulence and go through recession period just fine. British economy will pick up after all these and grow just fine. The uncertainty is which path the new British leaders will choose. Trade within the EU via the World Trade Organization or become a member of the EEA.
Take time to read about the British journey to independence!
Article 50 of the Treaty on European Union Explained New era of British Global Trade Opportunities BrExit an Explanation for Australia ! Overseas UK travel costs – Too increase outside of the EU? Australian Visa System set to come to the UK UK–EU Relationship: Historical Facts What Leaving the EU Means for the UK