The economic consequences of Brexit

The economic consequences of Brexit

What is the impact of Brexit for the world economy?

On May 23rd 2016, the British chose to leave the EU. Despite the opinion polls that were in favour of remain, the British preferred the autarkic system. The main consequences will principally be on jobs in the UK, the pound’s value and trade. Indeed, Brexit will potentially lead to some companies’ relocations, the pound sterling exchange rate has already depreciated and worldwide trade could probably be reduced.

           Britain’s labour market went into “freefall” during the month that followed the referendum according to recruiters. They reported the sharpest drop in permanent job placements since the subprime crisis. Indeed, the proportion of unemployment could rise from 4.9 to 5.5 per cent as a result of the UK’s decision, which is to leave the EU. This is explained by the potential relocations of some companies.

            Secondly, the pound’s value fell to its lowest level against the dollar after the referendum result. Moreover, the important financial indicators decreased after the news about the referendum result. It is proof of the interdependence of the worldwide economies. However, the pound sterling has bounced back and almost came back to its pre-Brexit level.

            The effect on worldwide trade will be one of the most important consequences post-Brexit. Considering the reduction of trade with the EU, the UK will obviously have to find new economic partners. The priority of Theresa May’s government will be to reach trade agreements with the US. While former President Obama notified the UK that Brexit would complicate or end some trade agreements with the US, President-elect Trump praised the decision of the British. The other potential economic partner could be Australia. Indeed, both of the prime ministers are enthusiastic about a trade deal between the countries of the Commonwealth. However, it is going to be tougher to get an agreement that would allow the UK to access the European single market.

Sources:

Financial Times: “UK job market after Brexit” 08/05/16

Independent: “Pound sterling value” 09/02/16

The Economist: “Brexit and Trade: Not so simple” 09/17/16

Dictionary: Linguee

Vocabulary: sharp / recruiters / survey / cautious / kick of / to bounce / tough

Moreover, Brexit and especially worldwide trade are topics on which I am working in economics class. So, I chose this subject to refine this topic, which will be useful later.

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