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The Early Effects Of Brexit On Businesses And The Economy

24/10/2016 14:42

Immediately after Brexit (the historical vote by the people for a British Exit from EU, on June 2 of 2016) the pound fell to its lowest level in over 30 years! In a statement by Ilaria Maselli (Senior Economist for Europe), the economic outcome of the exit on British businesses and the market, in general, was predicted to weaken steadily and will have continued negative implications for economies around the world.

Upon the Brexit vote, David Cameron resigned as Prime Minister, with Teresa May taking on the role. Mr. Cameron stated, upon his resignation, "I do not think it would be right for me to try to be the captain that steers our country to its next destination". Mrs. May said she would trigger Article 50 by the end of March 2017. Article 50 is the step that will start the timer that allows two years of Brexit talks, which means that Britain will be scheduled to leave the EU by March 2019.

It has only been a bit over four months since the unprecedented Brexit vote, but the economy is actually performing much better than many economists predicted. The unemployment rate and retail sales are staying resilient, but many still fear that the worse is yet to come, according to an article on Yahoo News. In the same article, analysts suggested that Mrs. May is more than likely considering a "hard" Brexit, which would mean that Britain would sever all of its ties with EU, disengage from the single market and strongly curtailing EU immigration.

Britain's new chancellor of the Exchequer, Philip Hammond, reassured business owners, that he would protect the economy during the negotiations, but it seems his reassurance may have done little (at this point) to quell the unrest felt by many business owners.

"We're working together across that referendum divide in the party to deliver the best possible deal for Britain.", Hammond stated, "I think confidence will gradually begin to return and people will start to see the shape of the future that we're mapping out."

"Of course we've got to reduce the deficit further but looking at how and when and at what pace we do that, and how we measure our progress in doing that is something that we now need to consider in the light of the new circumstances that the economy is facing," he told BBC radio.

In a paper discussing the impact of Brexit on the British Economy, Woodford Investment Management postulates that the overall effect of the Brexit on Britain's exports would be negligible due to Europe's manufacturing decline and its diminishing importance in the global economy. The paper also brings out the fact that, although 63% of Britain's exportation are directly linked to the EU membership, there is a high probability that trade agreements will be reached after Brexit that are favourable as there are advantages to both sides in keeping a close arrangement.

While Britain used to benefit from its EU membership greatly, those benefits are less than they were 20 years ago, and by withdrawing from the EU, Britain would have the ability to broker its trade deals with countries that are not a part of the EU. Those non-EU countries would find that negotiations with Britain would be much quicker and easier than having to go through the rigmaroles required by the European Union's bureaucracy.

While many have warned that the Brexit would be disastrous for Britain's economy and would be of a significant negative impact on businesses, it's more likely that the impact of Brexit on business would be relatively negligible. As a matter of fact, it may actually have more of a positive impact, than a negative one in the long run.

In a recent article on 22 WWLP, The CEO of Brompton Bike, William Butler-Adams stated that "Brexit before the vote I think was sort of over exaggerated: too scared, too extreme. The impact on our business is not seismic as they read in the papers. After the net effect in reality for us is pretty positive because our bike has become more competitive."

Adams went on to say, "I'm exporting to South Korea, to Chile, to Argentina, to Mexico to Colombia, they're not in Brexit how on earth am I managing to do that? Our largest export market is South Korea, so if we can sell to countries outside of the Eurozone today, we can do it tomorrow inside Europe."

What this all comes down to is that, while the economic future of Britain after Brexit is certainly unforeseeable, it isn't necessarily all the gloom and doom that some are predicting. It may, in fact, actually increase the economy, allowing for greater freedom in trading and doing business inside and outside of the European market. In fact, Brexit may actually be the best thing that has happened to Britain! We will just have to wait and see.

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