the brexit crash

I’m trying to foresee the economic consequences of Brexit. It’s not easy, obviously, otherwise professional economists would have it sorted. I want to only consider the probably consequences of events that have already happened, not try and consider the longer term trends.

First of all, the obvious: there’s been an almighty currency crash, the worst ever. The general mood among the cognescenti seems to be that the currency will continue in a downward direction, whatever the usual temporary ups. Furthermore, there are been global consequences to Brexit, with the Japanese government taking emergency action to control the Yen, the general mood being that a global recession is now more likely, and the US saying Brexit significantly increases European security risks.

POSITIVES

  • Exports will be cheaper, so more will be made and sold;
  • A lower currency means foreign investment will be cheaper.

NEGATIVES

  • Imports, such has oil, will become more expensive;
  • EU institutions in the UK will have to move out;
  • Companies using the UK as a base for european operation will move out (e.g. Vodafone)
  • Investors wanting to set up business in the EU will no longer consider the UK
  • The global recession caused by Brexit will reduce exports
  • The global recession cause by Brexit will increase bad feeling against the UK, because people will rightly regard the recession as entirely unnecessary
  • The reduced national credit rating caused by Brexit will increase the price of borrowing by the government, forcing a combination of increased taxes and reduced public spending
  • Foreign banks are less likely to invest in Britain (e.g. that Malay bank)
  • If the UK leaves the single market, both imports and exports will be subject to additional duties

As you can see, the negatives outweigh the positives. Furthermore, some of those negatives are immediate, whereas none of the positives are, which I expect to create a negative atmosphere making it more difficult to create new business. This is why I believe the disaster that is Brexit will cause the UK to enter a serious recession, and quite possibly a depression.

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