What has the brexit done to the UK economy?
Both post and prior to the Brexit there was a huge amount of negativity surrounding the UK. There was fearmongering surround the nation, with scares that the economy, property, importing and exporting...
Both post and prior to the Brexit there was a huge amount of negativity surrounding the UK. There was fearmongering surround the nation, with scares that the economy, property, importing and exporting, would all take a hit. Financial experts along with almost 50% of politicians were painting a very bleak picture indeed. So far, things haven’t turned out quite the way it might have been expected. Since the referendum in June, things have actually been quite positive.
UK property is still a big pull
Investment in UK property is still high. Unfortunately, this primarily is only focused on London, however, people still want to buy property in the UK. London prices are still extraordinary higher than anywhere else in the country and there were fears that the Brexit would see a further rise in the value of property. But Chinese investment went up by around 30 – 40 % on the current average. London is seen as a ‘long term project’ with investors having tremendous faith that the UK economy will come out of this stronger.
Lower borrowing rates have been seen as a major factor behind pulling in new buyers. Only four weeks after the referendum, the UK’s benchmark interest rate went down to a record low of 0.5% the lowest for seven years. With such a huge potential return on investment, London is in a complete league of its own compared to the rest of the UK with properties offering a yield of between 15.7% to 19.9%.
Fall in pound might not be bad news
A big fall in the value of the pound might seem disastrous, but on the whole it has helped the economy.
The devaluation of the pound has actually done the UK some good, turning the nation much more competitive on a global scale. It has increased exports and domestic businesses serving foreign clients. The possibility of a recession is still very much on the cards, however, as of yet people haven’t stopped spending. One of the easiest ways to determine this is retail, when money is short, retail therapy and luxury is normally the first thing to go, however, sales have barely dropped off at all. TSB commented that the lull was barely even ‘visible’.
Apart from the possible impact on trade, other struggling economics in the UK should actually see a boost by the drop in Pound. One possibility is seeing a drop in inflation, which has been an issue for a while. Data relating to consumer prices showed that despite a month over month decline in CPI by -0.10%, on an annualised basis, the headline figure rose 0.60%, marking the fastest pace since November 2014. Although this is still shy of the Centre Banks inflation target (2.00%), we can see positive progress being made, hopefully this will be helped even further by the accommodative monetary policy measures, which get implemented by the Central Banks.
Post Brexit, the biggest problem was never going to be the UK’s population spending money. Financial experts were worried about the immediate aftermath which was due to cause nervousness and doubt surrounding potential investments.
With the dust now settle and timelines relatively established, things have improved. The nation has mostly been able to avoid a complete catastrophe. With depreciation of the pound seemingly only bad news, it could perhaps help guide us towards a more positive economy, without the restraints of EU legislation.
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ABOUT THE AUTHOR
Sathesh is a freelance writer in London