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The Effects of Brexit on the UK economy

17 May 2017

Britain’s vote to leave the European Union was motivated by a number of factors: the perceived erosion of the UK’s sovereignty, anti-immigrant and Eurosceptic rhetoric from tabloids and right-wing politicians, not having to deal with the EU’s regulations on human rights, border control and funding and so on. Brexit is still a sore spot for many both for and against it, as well as the current administration’s apparent lack of urgency in dealing with the EU.

However, the Brexit vote is especially important to businesses operating in the UK. Whether it’s a small local business or a multinational corporation, Brexit will come to have serious downsides and some small advantages for those paying attention.

The biggest factor in Brexit for businesses is uncertainty. The value of the Pound slumped hours after the vote count had finished and foreign investors quickly shifted their money to more stable currencies, reaffirming the already pessimistic outlook for a post-Brexit Britain, and the value of the pound relative to the United States Dollar continues to decline, after talks of a ‘hard Brexit’ involving a total withdrawal from every facet of the EU.

Nevertheless, The UK has always been a stable economy, within and without the EU. The Commonwealth of Nations represents a valuable economic opportunity for the UK, as it becomes clear that leaving in a ‘hard Brexit’ will shut off the EU Single Market. The Commonwealth itself is composed of several nations with rapidly growing and stable economies, such as Canada, Australia, New Zealand, India, Nigeria and South Africa.

Despite the pessimistic outlook immediately after Brexit, the UK economy is starting to recover from the hysteria surrounding it. The FTSE announced that by the end of 2016, the share index has gone up by 13%, above what predicted pre-referendum. The OECD has predicted a GDP growth of 1.6: lower than pre-referendum estimates but far more optimistic than the 1.2% prediction immediately following the referendum.

Although we have undoubtedly lost some valuable benefits of being part of a large trading bloc like the EU, it is likely that the Commonwealth will be able to fill its boots while Article 50 is activated.

Ryan Shotton