Britain’s economy was plunged into a dizzying unknown on Friday as
the country lurched towards the EU exit, with the world economy bracing
for a hit on growth and unemployment. Financial markets on Friday indicated the turbulence that lies ahead
for the world’s fifth biggest economy, with the pound falling to its
lowest level against the dollar since 1985.
Those who voted for Britain to remain part of the EU argued long and
hard about the economic risks of Brexit, but ultimately appear to have
failed to convince voters.
The UK must now face up to the swirling winds of change.
In
the short term, a financial storm is expected to blow far and wide from
across London’s trading floors to all corners of Britain.
The many political uncertainties linked to Britain’s lengthy exit
process are set to impact the country’s economy in the medium to
long-term, according to experts.
The Conservative government of Prime Minister David Cameron, who
campaigned for Britain to remain, warned in a report prior to Thursday’s
vote that it could take more than a decade for the UK to negotiate both
an exit from the bloc and new international trade deals.
The report said Britain now faces “a long period of uncertainty” that
could last a decade, with heavy consequences for British businesses,
trade and inward investment.
Campaigners and supporters of Brexit downplayed this and many other
warnings on the economic fallout of Britain’s departure from the bloc.
Nevertheless, the World Trade Organization has predicted that British
exporters risk an extra £5.6 billion ($8.2 billion, 7.2 billion euros)
of extra annual customs duties following Brexit.
Whether these are lifted during Britain’s period of transition
remains to be seen, while the country’s banking and car manufacturing
sectors have made it clear that jobs would have to be relocated abroad
because of Thursday’s outcome.
“There are a number of large companies that say they are using the UK
as a gateway to Europe and a number of companies have said that they
would relocate their headquarters in the event of a Brexit — moving out
of London to other financial centres in Europe,” said Scott Corfe, a
director at the independent Centre for Economics and Business Research.
– Immigration impact –
Following a decision to leave, Britain’s immigration landscape would
also change as fewer people from the EU enter the country to work —
another factor which risks impacting on UK economic growth.
The International Monetary Fund last week argued that “while there is
much uncertainty about the precise economic effects of an exit from the
EU, they are likely negative and substantial”.
In the worst-case scenario, the economy could sink into recession
next year and overall economic output would be 5.6 percent lower than
otherwise forecast by 2019, with unemployment rising back above six
percent from 5.0 percent currently.
Experts have warned also of tumbling tax receipts and of Britain
potentially losing its AAA credit ratings — affecting the amount of
money it can borrow on markets at a time when it is still slashing state
spending under a severe austerity programme triggered by the 2008
global financial crisis.
UK economy plunges into chaos as Britain Exit EU
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