On the 23rd of June 2016, the British public walked down to their local polling stations and cast their vote in a simple question: “Should the United Kingdom remain a member of the European Union or leave the European Union?” The final result of the referendum was close, with 51.9% of voters voting in favour of leaving the European Union, with just 1.3 million total votes separating those in favour and those against. On the 29th of March 2017, Theresa May, the Conservative Prime Minister, initiated Article 50 and therefore the official process of Britain leaving the EU began.
In the final three months of 2016, GDP increased by 0.7% in Britain, whilst estimates for growth on a whole for the 2017/18 period is estimated at 1.8%. This rise in GDP was unprecedented, with many economic thinkers predicting a complete crash of the British economy if they were to vote to leave the EU. The FTSE 100 has risen by 16% since the eve of the referendum, a further indicator that many of the predicted negatives of a Brexit vote were inaccurate and spun by the media to try and convince the public to vote remain.
In August 2016, in an attempt to boost the economy in Britain, the Bank of England cut interest rates from 0.5% to 0.25%, a new record low for the United Kingdom. This is the first reduction in the costs of borrowing since 2009 and this helped to protect the economy from collapse and disaster. Furthermore, the British housing market is beginning to recover and pick up steam, with house prices rising by an estimated 4.5%-5.1% in the year between February 2016 and February 2017.
However, since the Brexit vote, there have been several key negative impacts on the British economy. House building has slowed to a six-month low due to cost increased, primarily down to the struggling state of the pound. The pound has been adversely affected by the referendum and, despite minor recovery over the past few months, is currently trading at around 15% lower against the dollar and 12% lower against the Euro than it was prior to the referendum. The weakening of the pound has effects on the British people too, holidays are costlier now and the pound’s fall has made some UK business assets look instantly weaker. Despite this, it is worth noting that the fall in the value of the pound has led to an influx of tourists, which has seemingly boosted retail sales in tourist hotspots.
The worst consequence of the referendum is the rise in inflation which followed it. In August 2016, inflation stood at just 0.6% but has since risen to 2.6% (as of July 2017), its highest level since 2013. The Brexit process is also damaging to British political parties, with a rise in party division causing key splits and factions within the Conservative and Labour parties.
All in all, it is unfair to assume that Brexit has only been damaging to the British economy, with some positive consequences coming out of last summer’s referendum: interest rates are down, the FTSE 100 has grown, and GDP is still growing. However, the negatives should not be overlooked, with the pound struggling against other major global currencies and inflation rising to a four year high.
Conservative cabinet minister David Davis continues to negotiate with the European Union about our terms of withdrawal. It is more important than ever that the British public and politicians work together so that the nation is in the best possible position when we officially leave the long-standing union, which is expected to happen by the end of March 2019.