Three months ago, a historic referendum was held in United Kingdom. Majority of Britons voted to opt out of the European Union. Since then, there has been a situation of tension and turmoil. Supporters of the EU and most of the economic experts have called it the most stupid decision by the public. There has been a change in power. Supporter of ‘remain in EU’ campaign.David Cameron stepped down as the Prime Minister of the country. A staunch supporter of BREXIT campaign, Theresa May has taken his place. It will take a lot of time for Britain to completely leave the EU. There are still a lot of paperwork, change in taxation policies, changes in trade regime etc.
Impact on Companies and Market-
HSBC warned that it could shift jobs to Paris before the referendum. Even after the results, its high command is saying much of the same thing. Some American companies such as the US Bank, Wells Fargo purchased a new HQ in London, as they took advantage of a sudden fall in the value of the Pound. There are also various issues regarding the ‘’passport rights’’.
FTSE 100 which is made up of multinational components, is lurching into the red point. Although, it has recovered a bit. The FTSE 250, made up of smaller domestic components, but its recovery is not as good as per FTSE 100. Exporters can have a profit, but the impact of increase in the cost of production due to costlier raw materials can be disastrous for the industries.
The Bank of England only cut a quarter points that resulted in a base rate of 0.25. It also purchased bonds to improve the economy. The base rates could hit 0.1 which could be disastrous for savers. Although, the borrowers will earn a moderate profit from it.
Employment and Inflation-
The rate of employment has fallen. Redundancy programmes are costly and that’s why the companies are waiting for a clear picture rather than executing these programmes. However, the good news is that the claimant count of jobs has fallen and the average weekly earnings are also the same. The wage growth is expected to be slow and the inflationary forces can lead to decline in standards of living.
Impact on Property Rates-
Many property funds were suspended in the aftermath of BREXIT. Residential property has been hit. In London, there has been a reduction of around 6% in property rates in famous areas.
There has been a deduction in budget revenue deficit target. The big companies are also losing confidence. The clouds of recession have been surrounding the UK. This clearly shows that why the respected economists supported ’the remain’ campaign. Uncertainty has arisen. Investment can fall heavily. The shape of the BREXIT still remains in the hands of political leadership. But if they opted out of the single market, this could result in shocking consequences.