This month on the blog we are taking an in-depth look at Brexit and the effects that UK withdrawal may have on the global economy. Now, here is a look at the impact that Brexit is predicted to have on the UK’s economy.
Since the Brexit vote at the end of June, economic experts have been scrambling to understand what implications UK withdrawal from the EU could have for the UK’s economy.
The Guardian reported in an article in mid-July that Brexit could be the trigger that ends London’s seven-year house-price boom, as international corporations will likely seek to move their operations out of the UK and into mainland Europe. In fact, London property prices could fall by more than 30%, even halving in the most expensive parts of the city, in the wake of Britain’s vote to leave the EU. In June, the average house price in London was £472,000—12 times average London earnings, which was significantly higher than the long-term average of six times. With Brexit, then, potentially forcing about 3,000 senior employees at financial firms to sell their London homes to relocate to Europe, the average house price could fall significantly, closer to the long-term average of six times average London earnings.
There are other economic factors to consider other than housing, however. Fortune, for example, reported in mid-July that Britain looked set for an economic slowdown and possibly even a recession following the Brexit vote. The news outlet pointed to early signals of economic slowdown, such as low consumer confidence when buying stocks and talk of banks losing their automatic right to sell financial services to the EU. Politics.co.uk reported that Brexit would reduce immigration—only by damaging the economy. International Business Times, meanwhile, reported an extra-gloomy perspective from leading fund manager Richard Buxton; he stated that fallout from Brexit will not be as severe as the financial crisis of 2008, but the economy would “judder to a halt.” Financial Times columnist Martin Wolf even called Brexit “the single worst event in British post-war history.”
Official data on how the Brexit vote is affecting the UK’s economy are only now being released, so any predictions about the UK’s economy must still wait some time to prove themselves. Perhaps chilling predictions about a deeply recessed economy will come to pass, or perhaps some economic experts are making more drastic predictions in order to prove a point—the coming months will definitely shed some light.