Brexit: How the UK has been affected in the three months since the vote
Currencies Direct September 22nd 2016 - 4 minute read
On 23 June 2016 Britain voted to leave the European Union (EU) in a historic referendum. There had been speculation by all sides about what would happen if citizens did vote to leave as no other nation had ever done so. Assumptions were all that could be made in the face of a lack of prior evidence.
In the three months since the decision was announced, how has Britain fared? Here, Currencies Direct examines the resulting impact.
Just a few hours after the vote to leave was announced, then prime minister David Cameron resigned. This was followed by a raft of other resignations – among them UKIP leader Nigel Farage, one of the most vocal leave campaigners. This lack of leadership at the very top level was to give the impression of an unstable country.
It caused a great deal of panic and contributed towards the plummeting of the pound.
What would happen to the British pound in the event of a leave vote was one of the most talked about aspects of the referendum.
Remain campaigners said that the pound would fall dramatically in value and would not recover, while those hoping for a leave vote were adamant that the pound would withstand the vote and come back stronger.
In the end, Sterling did fall – just as sharply and significantly as had been warned. It was at rock bottom levels for many weeks and currently remains weak.
How long the pound will trade poorly against other major currencies for remains to be seen. It will be a significant focus for analysts in the coming weeks and months.
Although Sterling has undoubtedly suffered as a result of the Brexit vote, there have been some positives seen in other economic data released since.
Many analysts expected the economy would suffer in the months following the Brexit vote.
However, this has largely not been the case. Since the decision was made, the UK has seen the release of data that has suggested that consumers and producers are not particularly concerned about what is going to happen.
This is likely down to the fact Article 50 – the mechanism for beginning the process of officially withdrawing from the EU – has not yet been invoked. When it is triggered, the situation in the UK is unlikely to change for a period of two years or more.
Retail, services and manufacturing have not been as affected as experts thought they would be.
In August, the IHS Markit Business Activity Index rose to 52.9, from 47.4 in July, which signalled a rise in UK services output. Although retail sales figures did decline by 0.2% between July and August, this fall was not as high as had been predicted by analysts.
The manufacturing consumer price index (CPI) in August was 53.3, a significant increase from the 41-month low of 48.3 posted in July. The rise in manufacturing was due in large part to the weak pound driving up export orders.
Employment has also defied many predictions, rising by 174,000 in the three months from May to July, according to the Office for National Statistics. These were the first figures to collect data after June’s vote.
However, there are a number of economists and financial experts who have expressed the belief that the UK is bound to enter a recession. This, many have said, is likely to happen when the UK officially completes the process of leaving the EU.
Whether this does happen will only be seen in time.
A number of analysts had predicted prior to the vote that if the public chose to leave, house prices would crash and not recover for years.
It turned out that prices did indeed drop, falling by an average of £3,600 between July and August, according to property listings site Rightmove. Estate agents Countrywide has also said that house prices will fall by 1% next year.
To add to the problems facing the UK property market, estate agents Savills has predicted that the most expensive parts of London will see a 9% fall in property prices and will not start growing again until 2019.
Savills said that this was the result of buyers waiting to see what the outcome of the Brexit negotiations would be. Since the capital has the highest number of foreign buyers, it is expected to be the hardest hit by the Brexit vote.
One thing that has not been halted by Brexit is investment abroad. British investors have not lost their desire for property in other countries.
A total of 48.2% of voters wanted to remain in the EU. This means that there are huge numbers of people who would like to keep some link with the Union.
According to German real estate firm Engels & Völkers, British interest in property in Mallorca, Spain, has risen by one-fifth since June’s vote. In the second quarter of 2016, British residents remained the top foreign buyers of Spanish property, according to Spain’s Property Registrars. Experts have said that this interest has been maintained because there are a huge number of residents who want to have a base in an EU member state, like Spain.
A number of analysts have said that purchasing property in EU member states could be a safe haven for Brits concerned about the future of their finances. Although the pound is currently not as strong as it has historically been, there are real bargains to be found in EU countries, such as Hungary, Croatia and Portugal.
For anyone wanting to get the best rates for the investment abroad, Currencies Direct can offer a secure way of doing so.