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Whither Post-Brexit Britain? 200-250 words

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Whither Post-Brexit Britain? 200-250 words

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Brexit has shaken the British economy to its core. Will Britain ever recover? What will need to happen for Britain to gain the economic power it had before Brexit? Write your opinion using cited material. Then comment on three other students' posts, agreeing or disagreeing, and offering a supported argument.

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Post Brexit Britain will damage the British economy in the long run. Anton Jimenez 

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Post Brexit Britain will damage the British economy in the long run. Anton Jimenez 

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The unexpected turn that will be written down in history known as brexit has become one of the main topics of discussion in the recent years. Even though a lot of people found out that the unrestricted movement of migrants and foreigners to their country was damaging people's capability of obtaining a job, this also meant that there was more external capital that was circling in the economy.

Source B mentions that the UK membership to the European Union had an estimate cost of 13 billion pounds per year, their retract could save about 8 billion into reallocating into new resources and a larger opportunity cost. The second major point that was uneasy for the British people, is the jobs that Indian, Chinese or Asian people in general would take from their country, creating a negative externality.

Source A clarifies that the economical frictionless environment with the EU, could result in a failure. “…real output would be lower by 0.2 percent in the long run under the FTA scenario…  (about 2.5 percent compared to the no-Brexit scenario)” having a negative impact on the development of new jobs and the reduction of potential investments in the long run.

Both arguments are strong, and have their serious impact one over the other. In my opinion the best development the UK could experience is to lower the restrictions to economical restrictions to the EU so that they can benefit from the external investment and a smart realocation of resourses that result in a goverment stimulus towards its own economy.

Source A: https://blogs.imf.org/2018/08/10/the-long-term-impact-of-brexit-on-the-european-union/#post/0

Source B: https://vittana.org/22-pros-and-cons-of-brexit

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By Jiaqian Chen, Christian Ebeke, Li Lin, Haonan Qu, and Jesse Siminitz

August 10, 2018

Versions in Español, Français, Português

When the United Kingdom leaves the European Union, higher barriers to trade, capital flows, and labor mobility will affect output and jobs not only in the UK but also in the remaining 27 EU member states. Since Brexit means both parties will withdraw from a frictionless economic relationship, there will be costs on both sides, as our new study suggests.

Bonds between the EU and the UK run deep: The UK is among the EU 27's largest trading partners, accounting for about 13 percent of its trade in goods and services. Beside bilateral trade links, there are substantial supply chain trade links between the EU-27 and the UK that involve several countries.

Financial linkages are also strong, with gross bilateral capital flows totaling around 52 percent of EU-27 GDP in 2016.

Migration flows have also strengthened over time, and are very large for some countries, such as Ireland.
Reversing integration will hurt long-term output and jobs in the EU
A constructed index that captures all these channels of integration indicates growing EU-UK bilateral integration over the past 30 years.

The reversal of that integration in following Brexit will hurt income and employment in the EU.

If the UK and the EU settle on a standard free trade agreement (FTA) where tariffs on goods trade are low but with higher non-tariff barriers, we estimate that EU-27 real output will be lower by 0.8 percent, and employment by 0.3 percent, in the long run than in a no-Brexit scenario once all transmission channels are accounted for.

Si nce Brexit means both parties will withdraw from a frictionless economic relationship, there will be costs on both sides.

If the parties default to WTO rules, the decline in real output relative to no-Brexit would be even larger, at 1.5 percent in the long run, and employment would fall by 0.7 percent. Under a relatively benign "Norway" scenario (EEA), however, where access to the single market is preserved while membership in the customs union is lost, the decline in output and employment for the EU-27 appears negligible.
Brexit-related hit: country-by-country estimates of the trade impact
The more any country trades with the UK, the larger the Brexit-related hit to its output will be. To shed light on this, we used a country-specific framework to study the direct and indirect trade effects from higher tariffs and non-tariff barriers for both goods and services trade. The simulated effects are relatively smaller compared to the estimates presented above as only trade links are accounted for in the model framework.

We find that EU-27 real output would be lower by 0.2 percent in the long run under the FTA scenario than under a no-Brexit scenario, with the hit to Ireland's income the largest in the EU‑27 (about 2.5 percent compared to the no-Brexit scenario), followed by the Netherlands, Denmark, Belgium, and Czech Republic.

These estimated impacts relative to no Brexit increase in the event of a default to WTO rules, reaching an output loss of 0.5 percent for the EU‑27, and an output loss of 4 percent for Ireland given the substantial increase in both tariff and non-tariff barriers.

Our study does not look at the effect of uncertainty about the future relationship between the EU-27 and the UK, or the transition to the new relationship. It focuses entirely on the long-term impact, when all parties have fully adjusted to the new relationship. The ultimate consequences will take years to materialize and will depend on the eventual deal between the EU 27 and the UK.

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The Long-Term Impact of Brexit on the European Union

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By Jiaqian Chen, Christian Ebeke, Li Lin, Haonan Qu, and Jesse Siminitz August 10, 2018 Versions in Español, Français, Português A container ship entering the Port of Marseille, France: The UK is among the European Union's largest trading partners, accounting

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The UK withdrew from the European Union on January 31, 2020 after 47 years of membership. Thus,
it is no surprise that such event has risen a lot of debates since. Some people have spoken in support
of Brexit, while others expressed strong disapproval. So far, Brexit supporters have been too
optimistic as nowadays economy of the UK is on the decline. Anyway, this is not the final point for
the country so let’s discuss perspectives of British economy.
Brexit has affected different sectors of British economy. For instance, many large businesses like
Barclay’s or Bank of America have moved their headquarters to Dublin with the purpose to have an
entry point to the EU economy. This has led to reduction in investments in the UK and has depressed
economic growth in the country. In addition to that, many EU-born workers left Britain. This
complicated the task to find applicants for businesses that decided to stay in the UK. Consequences
of these events can be seen in British economy’s growth rate, which fell sharply in 2021 after the
end of the transition period. It is also worth mentioning that the British pound fell from $1.48 on the
day of the referendum to $1.36 the next day and has not recovered since, staying in the range of
$1.38-$1.40.
In my opinion, British government obtains power and resources to solve all these problems. It should
negotiate new trade agreements with countries outside the EU and lower trade restrictions with the
EU members in order to get back pre-Brexit trading volumes. This will help to bring back investments
to the country and will increase the demand for British pound. As a result of this, the national
currency rate will raise improving economic climate in the country.

Source: https://www.thebalance.com/brexit-consequences-4062999

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Aftermath of Brexit (Aliya Allakhverdieva)

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Aftermath of Brexit (Aliya Allakhverdieva)

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There is no doubt that Brexit became a cause of massive changes in the economy of both the UK and European Union. All possible consequences were even more reinforced by Covid restrictions. Now let us dig into more specific economic problems that were provoked by Brexit.

I presume there is no secret that Brexit affected the world in many different ways: politically, socially and especially economically. It is worth mentioning that even today newsletter never let people forget about courageous decision of Theresa May’s parliament. For instance, this month british CPI is 3.2%, which is nearly the highest record in the history of island. Today «The Guardian» made an announcement that UK trade with EU falls sharply. The value of goods exported to EU countries has decreased by 1.7 billion pounds since July 2018. Honda factory  closed after making 3.7 million cars and BBC assumes that happened exactly because of Brexit.  Overall, 61% of firms in the UK experienced at least one issue relating to Brexit. High-tech companies such as aerospace, are predicted to be hit hardest as their competitiveness in foreign markets declines. I used to listen to Times radio every day in winter and they discussed a huge problem about… fishing, as the UK always made a huge profit out of cathing fish on their side of the Channel. The details are still being discussed.

In conclusion, scientists believe that real Brexit consequences are only yet to be experienced. There is a huge list of problems caused by Britain decision.

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I suppose that everyone knows that not a long time ago Britain made a serious decision and left the EU. Of course, it was very strong move, which affected Britain and Europe. Let's briefly discuss what problems occurred after this event.
We need to mention that consequences for public administrations, businesses and citizens were unavoidable.The new rules led to the fact that 17% of  companies have ceased their export trade with Great Britain altogether, 22% intend to change to suppliers from other countries and a further 13% intend to replace imports using local suppliers. All these factors changed economic situation in Europe. Moreover, it influenced the political ares too as some countries lost the value of such relationship. But despite the formal agreements, relations have continued to be strained. London and Brussels have continued diplomatic representation, coronavirus vaccine export and above all, new arrangements for Northern Ireland.
From my point of view, there are many problems connected to Brexit. Anyway, Britain will be able to recover.To gain the power that was before there have to be less boundaries and more economic development inside the country.
https://www.thetimes.co.uk/article/a-brexit-headwind-the-uk-recovery-could-do-without-fl8php0d0

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The script for the economy's post-pandemic recovery did not include a sequence in which a series of economic indicators started pointing downwards, and yet that is what we have been seeing. Why is it happening, and how serious is the threat to the upturn?

To rehearse some of the evidence, official figures a few days ago showed a surprise 2.5 per cent fall in retail sales last month. Although some diversion of spending from shops to hospitality had been expected, this was not the opening-up boost retailers had envisaged. Sales fell back in May after April's reopening of non-essential retail, trod water in June and then declined last month.

You write off the British shopper at your peril and the CBI's latest distributive trades survey

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A Brexit headwind the UK recovery could do without

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The script for the economy's post-pandemic recovery did not include a sequence in which a series of economic indicators started pointing downwards, and yet that is what we have been seeing. Why is it happening, and how serious is the threat to the upturn?

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Brexit hit the UK economy hard. (Dmitry Zlobin)

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Brexit hit the UK economy hard. (Dmitry Zlobin)

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When talking about brexit, there are many opinions about its results. Some believe that it wents to the economy and development of the country for the benefit, and some that it was a wrong step. This topic is worth discussing.

In my opinion, this was the wrong decision to leave the European Union.  First, it caused severe inflation. “We find that the Brexit vote increased CPI inflation by 1.7 percentage points in the year following the referendum.”

The next important factor was the outflow of global corporations from London. This happened due to the fact that foreign companies lost the advantages that England's participation in the European Union gave. “Following the Brexit referendum, many companies shifted assets, offices, or businesses operations out of Britain and to continental Europe. By the beginning of April 2019, banks had transferred more than US$1 trillion out of Britain, and asset management and insurance companies transferred US$130 billion out of Britain.” Many Britons have lost their jobs because their employers simply left.  It also hit the British economy.

The third factor I would like to point out is the complication of trading.  Previously, British entrepreneurs could easily sell their goods in the European Union, but now they have to pay huge duties and taxes.  The transportation of goods has also become more complicated, because now the goods are subject to much more inspection and control than before.

In my opinion, it will take Britain many years to return to the previous level.  Leaving the European Union set the country back many years. For Britain to regain its former economic strength, it is necessary to attract new investors to the country who will be strongly interested in strengthening England.

In conclusion, I would like to say that Britain can recover from the economic blow caused by Brexit.  This will take a long time and a lot of effort, but it is possible.

Sources:

1. https://en.wikipedia.org/wiki/Economic_effects_of_Brexit

2. https://cep.lse.ac.uk/pubs/download/brexit11.pdf

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Fedor krivenok. The consequences of Brexit

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Fedor krivenok. The consequences of Brexit

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The United Kingdom left the European Union in 31/1/20. Britain's membership has lasted for 47 years since 1973.
Despite new additional exclusive conditions of Britain's membership in EU, which were agreed in 2016, 51.9% voted for leaving the European Union.
In my opinion, Britain is quite strong country and in future it will definitely recover. Also, the consequences aren't so huge. The most damaged parts of UK's export were seafood (80% decrease) and meat (50%). From the other side, for the first time quantity of tourists increased and it helped to steady some parts of UK's economy.
Moreover, Britain toughened the entry of foreign citizens. There are a lot of foreign companies in the UK and this new entry rule concerned them, especially their workers.
Moving onto the Britain's ecomomic power, I think that the only thing this country needs is to give more bonuses to the foreign companies (to become some kind like Singapore or the Silicone Valley).
In conclusion I want to ephasise that Brexit is one of the most significant things ever happend with the UK. Britain is a really strong country. So, in future it will definitely solve all the problems and become one of the strongest economy country again.

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The economic effects of Brexit were a major area of debate during and after the referendum on UK membership of the European Union. The majority of economists believe that Brexit is likely to harm the UK's economy and reduce its real per capita income in the long term, and the referendum itself damaged the economy. It is likely to produce a large decline in immigration from countries in the European Economic Area (EEA) to the UK, and poses challenges for British higher education and academic research.

Immediate impact of the referendum

According to one study, the referendum result had pushed up UK inflation by 1.7 percentage points in 2017, leading to an annual cost of £404 for the average British household. Studies published in 2018 estimated that the economic costs of the Brexit vote were 2% of GDP, or 2.5% of GDP. According to a December 2017 Financial Times analysis, the Brexit referendum results had reduced national British income by 0.6% and 1.3%. A 2018 analysis by Stanford University and Nottingham University economists estimated that uncertainty around Brexit reduced investment by businesses by approximately 6 percentage points and caused an employment reduction by 1.5 percentage points. A number of studies found that Brexit-induced uncertainty about the UK's future trade policy reduced British international trade from June 2016 onwards. A 2019 analysis found that British firms substantially increased offshoring to the European Union after the Brexit referendum, whereas European firms reduced new investments in the UK.

Short-term macroeconomic forecasts by the Bank of England and other banks of what would happen immediately after the Brexit referendum were too pessimistic. The assessments assumed that the referendum results would create greater uncertainty in markets and reduce consumer confidence more than it did. A number of economists noted that short-term macroeconomic forecasts are generally considered unreliable, as they are something that academic economists do not do, but rather banks do. Economists have compared short-term economic forecasts to weather forecasts whereas the long-term economic forecasts are akin to climate forecasts: the methodologies used in long-term forecasts are "well-established and robust".

Immediate impact of the end of the transition period

At the end of transition period, a trade agreement was negotiated between the EU and the UK. It solved many issues to save trade between the UK and the EU which is a significant trade partner for the UK, but is not as good as the EU membership for removing all paperwork and ease trade.

There was overwhelming or near-unanimous agreement among economists that leaving the European Union would adversely affect the British economy in the medium- and long-term. Surveys of economists in 2016 showed overwhelming agreement that Brexit would likely reduce the UK's real per-capita income level. 2017 and 2019 surveys of existing academic research found that the credible estimates ranged between GDP losses of 1.2-4.5% for the UK, and a cost of between 1 and 10% of the UK's income per capita. These estimates varied depending on whether the UK left via a 'hard' or 'soft' Brexit. In January 2018, the UK government's own Brexit analysis was leaked; it showed that UK economic growth would be stunted by 2-8% for at least 15 years following Brexit, depending on the leave scenario.

According to most economists, EU membership has a strong positive effect on trade and, as a result, the UK's trade would be worse off when it left the EU. According to a study by University of Cambridge economists, under a hard Brexit, whereby the UK reverts to WTO rules, one-third of UK exports to the EU would be tariff-free, one-quarter would face high trade barriers and other exports risk tariffs in the range of 1-10%. A 2017 study found that "almost all UK regions are systematically more vulnerable to Brexit than regions in any other country." A 2017 study examining the economic impact of Brexit-induced reductions in migration found that there would likely be "a significant negative impact on UK GDP per capita (and GDP), with marginal positive impacts on wages in the low-skill service sector." It is unclear how changes in trade and foreign investment will interact with immigration, but these changes are likely to be important.

In October 2021, the UK government's Office of Budget Responsibility calculated that Brexit would cost 4% of GDP per annum over the long term. 4% of 2021 UK GDP is the equivalent of a £32bn cost per annum to the UK taxpayer. After rebates, the UK's EU membership fee in 2018 was £13.2bn.

CIPS has reported think tank Campaign for European Reform's research, which found that UK goods trade was 11.2%, or £8.5bn, lower in September 2021 than it would have been according to the Office for Budget Responsibility's forecast in March 2016.

A 2022 study from research firm Resolution Foundation found that Brexit had reduced the openness and competitiveness of the British economy.

The "divorce bill"

Since fiscal impacts will play a major role in the outcome of Brexit, Theresa May has stated that money will be taking first place as the key importance surrounding Brexit, the others being borders and laws. The Brexit divorce bill is essentially a financial settlement in which the United Kingdom must pay off their liabilities to the EU. This includes, for example, unpaid contributions to the EU's multi-year finances. There is no current set figure for the bill but estimates have shown it to be at least £39bn which could see increases as far as 2022. First year costs (2018-2019) are expected to be close to £14bn and decreasing to £7bn by 2022-2023.

Following the Brexit referendum, many companies shifted assets, offices, or businesses operations out of Britain and to continental Europe and Ireland. By the beginning of April 2019, banks had transferred more than US$1 trillion out of Britain, and asset management and insurance companies transferred US$130 billion out of Britain.

A March 2019 report from the independent research institute New Financial identified 269 companies in the banking or financial services sector that had relocated portions of their businesses or staff following Brexit; of these moves, 239 were confirmed as Brexit-related. The greatest number of moves were to Dublin (30%), followed by Luxembourg (18%), Frankfurt (12%), Paris (12%), and Amsterdam (10%).

Supporters of withdrawal argued that ending net contributions to the EU would allow for tax cuts or government spending increases. On the basis of Treasury figures, in 2014 the United Kingdom's gross national contribution (ignoring the rebate) was £18.8 billion, about 1% of GDP, or £350 million a week. Because the UK receives (per capita) less EU spending than other member states, a rebate was negotiated; net of this rebate, the contribution was £14.4 billion, approximately 0.8% of GDP, or £275 million a week. If EU spending in Britain is also taken into account, the average net contribution for the next five years is estimated at about £8 billion a year, which is about 0.4% of national income, or £150 million per week. The Institute for Fiscal Studies have said that the majority of forecasts of the impact of Brexit on the UK economy indicated that the government would have less money to spend even if it no longer had to pay into the EU.

According to economist Paul Krugman, Brexit supporters' assertions that leaving the single market and customs union might increase UK exports to the rest of the world are wrong. He considers the costs of Brexit might be around 2 per cent of GDP.

European experts from the World Pensions Council (WPC) and the University of Bath have argued that, beyond short-lived market volatility, the long-term economic prospects of Britain remain high, notably in terms of country attractiveness and foreign direct investment (FDI): "Country risk experts we spoke to are confident the UK's economy will remain robust in the event of an exit from the EU. 'The economic attractiveness of Britain will not go down and a trade war with London is in no one's interest,' says M Nicolas Firzli, director-general of the World Pensions Council (WPC) and advisory board member for the World Bank Global Infrastructure Facility [...] Bruce Morley, lecturer in economics at the University of Bath, goes further to suggest that the long-term benefits to the UK of leaving the Union, such as less regulation and more control over Britain's trade policy, could outweigh the short-term uncertainty observed in the [country risk] scores."

The mooted importance of the UK's membership of the EU as a lure for FDI has long been stressed by supporters of the UK's continued involvement in the EU. In this view, foreign firms see the UK as a gateway to other EU markets, with the UK economy benefiting from its resulting attractiveness as a location for activity. The UK is certainly a major recipient of FDI. In 2014, it held the second largest stock of inward investment in the world, amounting to just over £1 trillion or almost 7% of the global total. This was more than double the 3% accounted for by Germany and France. On a per capita basis, the UK is the clear front-runner among major economies with a stock of FDI around three times larger than the level in other major European economies and 50% larger than in the US.

The BBC reported on 28 April 2017 that property investment firm JLL (company) data shows Asian investors accounted for 28% of the transactions in the UK property market in 2016, up from the 17% the year before - indicating that Brexit is not dissuading Asian property investors. The BBC also cited Chinese international property portal Juwai.com, which reported a 60% increase in enquiries into UK property in the prior 12 months. Property firm CBRE Group said in January 2017 that Brexit has increased risk in UK property markets by creating new uncertainties.

With Brexit, EU law is no longer applicable in the UK. This means British mobile network operators - like EE Limited - will be free to charge users for roaming service.

When the London Stock Exchange opened on Friday 24 June 2016, the FTSE 100 fell from 6338.10 to 5806.13 in the first ten minutes of trading. It recovered to 6091.27 after a further 90 minutes before further recovering to 6162.97 by the end of the day's trading. This equated to a fall of 3% by the close of trading. When the markets reopened the following Monday, the FTSE 100 showed a steady decline, losing over 2% by mid-afternoon. Upon opening later on the Friday after the referendum, the US Dow Jones Industrial Average dropped nearly 450 points or about 2.5% in less than half an hour. The Associated Press called the sudden worldwide stock market decline a stock market crash. Internationally, more than US$2trillion of wealth in equities markets was wiped out in the highest one-day sell-off in recorded history, in absolute terms. The stock market losses amounted to a total of 3 trillion US dollars by 27 June; up to the same date, the FTSE 100 index had lost £85 billion. Near the close of trading on 27 June, the domestically-focused FTSE 250 Index was down approximately 14% compared to the day before the referendum results were published.

However, by 1 July the FTSE 100 had risen above pre-referendum levels, to a ten-month high. Taking the previous fall into account, this represented the index's largest single-week rise since 2011. On 11 July, it officially entered bull market territory, having risen by more than 20% from its February low. The FTSE 250 moved above its pre-referendum level on 27 July. In the US, the S&P 500, a broader market than the Dow Jones, reached an all-time high on 11 July.

On the morning of 24 June, the pound sterling fell to its lowest level against the US dollar since 1985, marking the pound down 10% against the US dollar and 7% against the euro. The drop from $1.50 to $1.37 was the biggest move for the currency in any two-hour period in history. The pound remained low, and on 8 July became the worst performing currency of the year, against 31 other major currencies, performing worse than the Argentine peso, the previous lowest currency. By contrast, the pound's trade-weighted index is only back at levels seen in the period 2008-2013.

The referendum result also had an immediate economic effect on a number of other countries. The South African rand experienced its largest single-day decline since 2008, dropping in value by over 8% against the US dollar. Other countries negatively affected included Canada, whose stock exchange fell 1.70%, Nigeria, and Kenya. This was partly due to a general global financial shift out of currencies seen as risky and into the US dollar, and partly due to concerns over how the UK's withdrawal from the EU would affect the economies and trade relations of countries with close economic links to the United Kingdom.

On 5 January 2017, Andy Haldane, the Chief Economist and the Executive Director of Monetary Analysis and Statistics at the Bank of England, admitted that forecasts predicting an economic downturn due to the referendum have so far been inaccurate and noted strong market performance since the referendum.

In January 2021, Euronext became Europe's largest stock market, as London lost its dominance for the first time since 1986.

On 27 June 2016, Chancellor of the Exchequer George Osborne attempted to reassure financial markets that the UK economy was not in serious trouble. This came after media reports that a survey by the Institute of Directors suggested that two-thirds of businesses believed that the outcome of the referendum would produce negative results as well as falls in the value of sterling and the FTSE 100. Some British businesses had also predicted that investment cuts, hiring freezes and redundancies would be necessary to cope with the results of the referendum. Osborne indicated that Britain was facing the future "from a position of strength" and there was no current need for an emergency Budget. "No-one should doubt our resolve to maintain the fiscal stability we have delivered for this country .... And to companies, large and small, I would say this: the British economy is fundamentally strong, highly competitive and we are open for business."

On 14 July 2016 Philip Hammond, Osborne's successor as Chancellor, told BBC News the referendum result had caused uncertainty for businesses, and that it was important to send "signals of reassurance" to encourage investment and spending. He also confirmed there would not be an emergency budget: "We will want to work closely with the governor of the Bank of England and others through the summer to prepare for the Autumn Statement, when we will signal and set out the plans for the economy going forward in what are very different circumstances that we now face, and then those plans will be implemented in the Budget in the spring in the usual way."

It was expected that the weaker pound would also benefit aerospace and defence firms, pharmaceutical companies, and professional services companies; the share prices of these companies were boosted after the EU referendum.

On 12 July 2016, the global investment management company BlackRock predicted the UK would experience a recession in late 2016 or early 2017 as a result of the vote to leave the EU, and that economic growth would slow down for at least five years because of a reduction in investment. On 18 July, the UK-based economic forecasting group EY ITEM club suggested the country would experience a "short shallow recession" as the economy suffered "severe confidence effects on spending and business"; it also cut its economic growth forecasts for the UK from 2.6% to 0.4% in 2017, and 2.4% to 1.4% for 2018. The group's chief economic adviser, Peter Soencer, also argued there would be more long-term implications, and that the UK "may have to adjust to a permanent reduction in the size of the economy, compared to the trend that seemed possible prior to the vote". Senior City investor Richard Buxton also argued there would be a "mild recession". On 19 July, the International Monetary Fund (IMF) reduced its 2017 economic growth forecast for the UK from 2.2% to 1.3%, but still expected Britain to be the second fastest growing economy in the G7 during 2016; the IMF also reduced its forecasts for world economic growth by 0.1% to 3.1% in 2016 and 3.4% in 2017, as a result of the referendum, which it said had "thrown a spanner in the works" of global recovery.

On 20 July 2016, a report released by the Bank of England said that although uncertainty had risen "markedly" since the referendum, it was yet to see evidence of a sharp economic decline as a consequence. However, around a third of contacts surveyed for the report expected there to be "some negative impact" over the following year.

In September 2016, following three months of positive economic data after the referendum, commentators suggested that many of the negative statements and predictions promoted from within the "remain" camp had failed to materialise, but by December, analysis began to show that Brexit was having an effect on inflation.

Research by the Centre for European Reform[clarification needed ] suggests the UK economy is 2.5% smaller than it would have been if Remain had won the referendum. Public finances fell by £26bn a year. This amounts to £500m a week and is growing. An estimate suggested Britain's economy is 2.1% smaller than it would have been after the first quarter of 2018. On 23 September 2022, the day of the Truss-Kwarteng mini-budget, Mark Carney summarised the impact of Brexit as follows: "in 2016 the British economy was 90 per cent the size of Germany's. Now it is less than 70 per cent. And that calculation was made before today."

Toyota plans a one-day production pause at its Burnaston factory on 1 November. The car maker cites uncertainty about the actual supply situation on "the first day of Brexit".

On the day after the referendum, Bank of England Governor Mark Carney told a press conference:

The capital requirements of our largest banks are now 10 times higher than before the financial crisis. The Bank of England has stress-tested those banks against scenarios far more severe than our country currently faces. As a result of these actions UK banks have raised over a £130bn of new capital and now have more than £600bn of high quality liquid assets. That substantial capital and huge liquidity gives banks the flexibility they need to continue to lend to UK businesses and households even during challenging times.
Moreover, as a backstop to support the functioning of the markets the Bank of England stands ready to provide more than £250bn of additional funds through its normal market operations. The Bank of England is also able to provide substantial liquidity in foreign currency if required. We expect institutions to draw on this funding if and when appropriate.
It will take some time for the UK to establish a new relationship with Europe and the rest of the world. So some market and economic volatility can be expected as this process unfolds, but we are well prepared for this. Her Majesty's Treasury and the Bank of England have engaged in extensive contingency planning and the chancellor and I have remained in close contact including through the night and this morning. The Bank of England will not hesitate to take additional measure as required, as markets adjust.

Nonetheless, share prices of the five largest British banks fell an average of 21% on the morning after the referendum. Shares in many other non-UK banks also fell by more than 10%. By the end of Friday's trading, both HSBC and Standard Chartered had fully recovered, while Lloyds, RBS Group and Barclays remained more than 10% down. All of the Big Three credit rating agencies reacted negatively to the vote: Standard & Poor's cut the UK credit rating from AAA to AA, Fitch Group cut from AA+ to AA, and Moody's cut the UK's outlook to "negative".

To increase financial stability, on 5 July the Bank of England released £150 billion in lending by reducing the countercyclical capital buffers that banks are required to hold.

Fears of a fall in commercial property values led investors to begin redeeming investments in property funds, prompting Standard Life to bar withdrawals on 4 July, and Aviva followed suit the next day. Other investment companies including Henderson Group and M&G Investments cut the amount that investors cashing in their funds would receive. In the following weeks, the suspension of redemptions by several companies was lifted, replaced by exit penalties, and the exit penalties were successively reduced.

On 4 October 2016, the Financial Times assessed the potential effect of Brexit on banking. The City of London is world leading in financial services, especially in foreign exchange currency transactions, including euros. This position is enabled by the EU-wide "passporting" agreement for financial products. Should the passporting agreement expire in the event of a Brexit, the British financial service industry might lose up to 35,000 of its 1 million jobs, and the Treasury might lose 5 billion pounds annually in tax revenue. Indirect effects could increase these numbers to 71,000 job losses and 10 billion pounds of tax annually. The latter would correspond to about 2% of annual British tax revenue.

By July 2016 the Senate of Berlin had sent invitation letters encouraging UK-based start-ups to re-locate to Berlin. According to Anthony Browne of the British Banking Association, many major and minor banks may relocate outside the UK.

Economists have warned that London's future as an international financial centre depends on whether the UK will obtain passporting rights for British banks from the European Union. If banks located in the UK cannot obtain passporting rights, they have strong incentives to relocate to financial centres within the EU. According to John Armour, Professor of Law and Finance at Oxford University, "a 'soft' Brexit, whereby the UK leaves the EU but remains in the single market, would be a lower-risk option for the British financial industry than other Brexit options, because it would enable financial services firms to continue to rely on regulatory passporting rights."

Asset management companies

But the situation may be different when it comes to the fund management industry, as British asset owners, notably UK pension funds, often constitute an incommensurate share of total turnover for German, French, Dutch and other Continental European asset managers.

This imbalance could potentially give Britain some negotiating leverage e.g. power of retorsion in case the EU attempts to impose an abrupt cancellation of the mutually-binding obligations and advantages pertaining to the Markets in Financial Instruments Directive 2004 (" fund passporting"). Research conducted by the World Pensions Council (WPC) shows that

"Assets owned by UK pension funds are more than 11 times bigger than those of all German and French pension funds put together [...] If need be, at the first hint of threat to the City of London, Her Majesty's Government should be in a position to respond very forcefully."

In July 2016, the IMF released a report warning that "'Brexit' marks the materialisation of an important downside risk to global growth," and that considering the current uncertainty as to how the UK would leave the EU, there was "still very much unfolding, more negative outcomes are a distinct possibility". In September 2018 the IMF stated that Brexit would probably, "entail costs", but a disorderly leaving could result in, "a significantly worse outcome". Christine Lagarde said, "Any deal will not be as good as the smooth process under which goods, services, people and capital move around between the EU and the UK without impediments and obstacles. Our projections assume a timely agreement with the EU on a broad free-trade pact and a relatively smooth Brexit process after that. A more disruptive departure will have a much worse outcome. Let me be clear: compared with today's smooth single market, all the likely Brexit scenarios will have costs for the UK economy, and to a lesser extent for the EU as well. The larger the impediments to trade in the new relationship, the costlier it will be." Lagarde also said a "disorderly" or "crash" Brexit would have many results, including cuts to growth, a worsened deficit and depreciation of sterling, causing the size of the UK economy to be reduced. She added, "The larger the impediments to trade in the new relationship, the costlier it will be." Lagarde was asked if she predicted any positives from Brexit, Lagarde said, "I see a lot of negatives. If all the uncertainties were removed it would be better. It is bad for the economy to have this amount of uncertainty."

Held in late July 2016 in Chengdu, China this summit of finance ministers of 20 major economies warned that the UK's planned departure from the European Union was adding to uncertainty in the global economy and urged that the UK should remain close to the European Union to reduce turmoil. While the G20 agreed that other world factors, including terrorist acts, were creating problems, Brexit was at the forefront of their concerns.

In interviews while attending the G20 Summit, Philip Hammond, the UK's recently appointed Chancellor of the Exchequer, said the country would attempt to minimise uncertainty by explaining in the near future "more clearly the kind of arrangement we envisage going forward with the European Union". He emphasised that "the uncertainty will only end when the deal is done" but hoped that the UK and the EU would be able to announce some agreement by late 2016 as to how the exit would be staged. Hammond also reiterated previous Government comments indicating that steps would be taken to stimulate the economy including tax cuts or increased spending, though without specifics. The UK was also planning to increase bilateral trade with China, he told the BBC. According to Hammond, "Once we are out of the European Union then I have no doubt on both sides we will want to cement that relationship into a firmer structure in a bilateral way that's appropriate."

Although he was not addressing only the UK's departure from the EU, Mark Carney, chair of the Financial Stability Board (and Governor of the Bank of England), sent a letter in late July 2016 to Finance Ministers attending the G20 Summit and to Central Bank Governors about the difficulties the global economy had weathered (including the effects of Brexit) and the steps the FSB was taking. The letter indicated that the financial system had "continued to function effectively" in spite of the "spikes in uncertainty and risk aversion", confirming that "this resilience in the face of stress demonstrates the enduring benefits of G20 post-crisis reforms." He emphasised the value of specific reforms that had been implemented by the Financial Stability Board stating that these had "dampened aftershocks from these events [world crises] rather than amplifying them". He expressed confidence in the FSB's strategies: "This resilience in the face of stress demonstrates the enduring benefits of G20 post-crisis reforms."

1. ^ Baldwin, Richard (31 July 2016). "Brexit Beckons: Thinking ahead by leading economists". VoxEU. Centre for Economic Policy Research. Archived from the original on 25 November 2017. On 23 June 2016, 52% of British voters decided that being the first country to leave the EU was a price worth paying for 'taking back control', despite advice from economists clearly showing that Brexit would make the UK 'permanently poorer' (HM Treasury 2016). The extent of agreement among economists on the costs of Brexit was extraordinary: forecast after forecast supported similar conclusions (which have so far proved accurate in the aftermath of the Brexit vote).

2. ^ Giles, Chris; Tetlow, Gemma (7 January 2017). "Most economists still pessimistic about effects of Brexit". Financial Times. Archived from the original on 22 July 2019.

3. ^ Giles, Chris (16 April 2017). "Brexit will damage UK standards of living, say economists". Financial Times. Archived from the original on 22 July 2019. Unlike the short-term effects of Brexit, which have been better than most had predicted, most economists say the ultimate impact of leaving the EU still appears likely to be more negative than positive. But the one thing almost all agree upon is that no one will know how big the effects are for some time.

4. ^ "Brexit to Hit Jobs, Wealth and Output for Years to Come, Economists Say". Bloomberg L.P. 22 February 2017. Archived from the original on 22 July 2019. The U.K. economy may be paying for Brexit for a long time to come... It won't mean Armageddon, but the broad consensus of economists-whose predictions about the initial fallout were largely too pessimistic-is for a prolonged effect that will ultimately diminish output, jobs and wealth to some degree.

5. ^ Forte, Giuseppe; Portes, Jonathan (1 May 2017). Macroeconomic Determinants of International Migration to the UK (Report). Rochester, NY. SSRN 2979949.

6. ^ Eichengreen, Barry (10 August 2017). "The experts strike back! How economists are being proved right on Brexit". The Guardian. ISSN 0261-3077.

7. ^ Sampson, Thomas (2017). "Brexit: The Economics of International Disintegration". Journal of Economic Perspectives. 31 (4): 163-184. doi:10.1257/jep.31.4.163. ISSN 0895-3309. The results I summarize in this section focus on long-run effects and have a forecast horizon of 10 or more years after Brexit occurs. Less is known about the likely dynamics of the transition process or the extent to which economic uncertainty and anticipation effects will impact the economies of the United Kingdom or the European Union in advance of Brexit.

8. ^ Goodman, Peter S. (20 May 2016). "'Brexit,' a Feel-Good Vote That Could Sink Britain's Economy". The New York Times. ISSN 0362-4331. finding economists who say they believe that a Brexit will spur the British economy is like looking for a doctor who thinks forswearing vegetables is the key to a long life

9. ^ Menon, Anand (Spring 2019). "The economic consequences of the Brexit deal" (PDF). UK and EU.

10. Sodha, Sonia; Helm, Toby; Inman, Phillip (28 May 2016). "Economists overwhelmingly reject Brexit in boost for Cameron". The Observer. ISSN 0029-7712.

11. ^ "Brexit to Hit Jobs, Wealth and Output for Years to Come, Economists Say". Bloomberg L.P. 22 February 2017. The U.K. economy may be paying for Brexit for a long time to come... It won't mean Armageddon, but the broad consensus among economists-whose predictions about the initial fallout were largely too pessimistic-is for a prolonged effect that will ultimately diminish output, jobs and wealth to some degree.

12. ^ Corsetti, Giancarlo; Crowley, Meredith; Exton, Oliver; Han, Lu (13 December 2017). "A granular analysis of the exposure of UK exports to EU tariffs, quotas and antidumping under 'no deal'". VoxEU.org.

13. Peter S. Goodman, For Many British Businesses, Brexit Has Already Happened, New York Times (1 April 2019).

14. William Wright, Christian Benson & Eivind Friis Hamre, The New Financial Brexitometer, New Financial (March 2019).

15. ^ The end of British austerity starts with Brexit J. Redwood, The Guardian, 14 April 2016

16. ^ "Bank of England Economist: Brexit Predictions Were Wrong". Fox News (from the Associated Press). 6 January 2017.

17. ^ "The largest stock market in Europe is no longer London, but Amsterdam". 12 February 2021.

18. ^ Dewan, Angela; McKirdy, Euan (27 June 2016). "Brexit: UK government shifts to damage control". CNN. Not since World War II has Britain faced such an uncertain future.

19. ^ De Peyer, Robin (18 July 2016). "Britain 'set for recession' as Richard Buxton calls leaving EU 'horrible'". London Evening Standard.

20. ^ Luce, Edward (14 October 2022). "Lunch with the FT: Mark Carney: 'Doubling down on inequality was a surprising choice'". Financial Times. The Financial Times Limited. Put it this way, in 2016 the British economy was 90 per cent the size of Germany's. Now it is less than 70 per cent. And that calculation was made before today.

21. ^ Sparrow, Andrew; Weaver, Matthew; Oltermann, Philip; Vaughan, Adam; Asthana, Anushka; Tran, Mark; Elgot, Jessica; Watt, Holly; Rankin, Jennifer; McDonald, Henry; Kennedy, Maev; Perraudin, Frances; Neslen, Arthur; O'Carroll, Lisa; Khomami, Nadia; Morris, Steven; Duncan, Pamela; Allen, Katie; Carrell, Severin; Mason, Rowena; Bengtsson, Helena; Barr, Caelainn; Goodley, Simon; Brooks, Libby; Wearden, Graeme; Quinn, Ben; Ramesh, Randeep; Fletcher, Nick; Treanor, Jill; McCurry, Justin; Adams, Richard; Halliday, Josh; Pegg, David; Phipps, Claire; Mattinson, Deborah; Walker, Peter (24 June 2016). "Brexit: Nicola Sturgeon says second Scottish referendum 'highly likely'". The Guardian.

22. ^ "Bank shares plunge after Britons vote to leave the EU". Financial Times. The Financial Times Limited. 24 June 2016.

23. ^ "The Bank of England's approach to the authorisation and supervision of international banks, insurers and central counterparties". Bank of England. Having a large financial sector brings substantial benefits to the UK. A deep and liquid financial market lowers the cost of finance to households and businesses. The financial services sector accounts for 7% of output and is a source of over 1 million jobs, two-thirds of which are outside London. It contributes around £70bn, or 11%, of annual tax revenues. The UK's financial sector also brings substantial benefits to EU households and firms, allowing them to access a broad range of services efficiently and reliably. UK-located banks underwrite around half of the debt and equity issued by EU companies. UK-located banks are counterparty to over half of the over-the-counter (OTC) interest rate derivatives traded by EU companies and banks. As many as 30 million EEA policyholders are insured through a UK-based insurer. Central counterparties (CCPs) located in the United Kingdom provide services to EU clients in a range of markets. UK-located asset managers account for 37% of all assets managed in Europe. Globally, the UK has the largest share of cross-border bank lending, foreign exchange trading and interest rate derivatives. It also has the second largest asset management industry and the fourth largest insurance industry in the world. This concentration of activity increases efficiencies in the provision of finance, which in turn support international trade and cross-border investment.

24. ^ "Brexit: the United-Kingdom and EU financial services" (PDF). Economic Governance Support Unit of the European Parliament. 9 December 2016.

25. ^ Eichengreen, Barry (7 January 2019). "The international financial implications of Brexit". International Economics and Economic Policy. 16: 37-50. doi:10.1007/s10368-018-0422-x. ISSN 1612-4812. S2CID 159090073.

26. ^ IMF chief highlights recession risk of no-deal Brexit The Guardian 17 September 2018

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The economic effects of Brexit were a major area of debate during and after the referendum on UK membership of the European Union. The majority of economists believe that Brexit is likely to harm the UK's economy and reduce its real per capita income in the long term, and the referendum itself damaged the economy.