Two years on, Brexit reflects poorly on UK's economy as Therasa May govt remains split on relations with EU

There are those who favor a 'hard Brexit,' a clean break that takes Britain out of the bloc's free trade union but also gives it more freedom to strike new trade deals around the world.

Press Trust of India June 23, 2018 16:06:43 IST
Two years on, Brexit reflects poorly on UK's economy as Therasa May govt remains split on relations with EU

London: While it's still unclear what Brexit will look like when it happens next year, the decision to leave has already had a clear effect on the economy: households are poorer, companies are more cautious about investing, and the property market has cooled.

In the two years since the vote to leave the European Union, Britain has gone from being a pace-setter among the world's big economies to falling into the slow lane. And the uncertainty over what relations with the EU will be when Brexit becomes official on 29 March, 2019 could make matters worse.

Prime Minister Theresa May's Conservative government remains split on what those relations should be. There are those who favor a "hard Brexit," a clean break that takes Britain out of the bloc's free trade union but also gives it more freedom to strike new trade deals around the world.

Two years on Brexit reflects poorly on UKs economy as Therasa May govt remains split on relations with EU

File image of British Prime Minister Theresa May. AP

Others want to keep Britain as close as possible to the EU, Britain's biggest trading partner, which could mean it has to obey more of the bloc's rules.

Big companies are sounding the alarm bell, with plane making giant Airbus this week threatening to pull out of the country, where it employs 14,000, if it gets no clarity on future trade deals.

"Thousands of skilled, well-paid jobs are now on the line because of the shambolic mess the government have created over the Brexit negotiations," said Darren Jones, the lawmaker for the community where Airbus has its plant.

Before the referendum of June 2016, the British economy had been one of the fastest-growing industrial economies for years. Now, it's barely growing. In the first quarter of this year it expanded by just 0.1 per cent from the previous three-month period, its slowest rate in about five years.

For most people, the first and most noticeable impact was the drop in the pound. The currency slid 15 percent after the vote in June 2016 to a post-1985 low of $1.21. That boosted prices by making imports and energy more expensive for consumers and companies - the rate of inflation hit a high of 3 per cent late last year.

The weaker pound helped some companies: exporters and multinationals that do not sell mainly in the UK. But it hurt consumer spending and businesses that depend on their shopping. The retail industry was hit hard, with high-profile companies like Toys R Us and Maplin going bust, and supermarket chain Marks and Spencer planning deep cuts.

While prices rose, wages lagged, even though unemployment is at its lowest since 1975, at 4.2 percent.

"After Brexit, prices definitely went up", said Nagesh Balusu, manager of the Salt Whisky Bar and Dining Room in London. "We struggled a bit earlier this year, so now we've increased the prices." The bar is next to Hyde Park, a popular destination for foreign visitors.

"The tourists have a good exchange rate. They know they can spend a little bit more than they usually do. But the locals are coming a little less. They are starting to think about how much they spend." The governor of the Bank of England, Mark Carney, estimated recently that average household incomes are around 900 pounds lower than the bank was forecasting on the eve of the referendum.

Updated Date:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

EU chief Ursula von der Leyen self-isolates as member of staff tests positive for COVID-19
World

EU chief Ursula von der Leyen self-isolates as member of staff tests positive for COVID-19

The European Union leaders’ summit began on Thursday, and the second day's agenda includes COVID-19 response, post-Brexit trade talks and climate change

Europe thought it had tamed COVID-19; continent now faces virus resurgence
World

Europe thought it had tamed COVID-19; continent now faces virus resurgence

In Britain, which has suffered the greatest number of virus deaths in Europe, Prime Minister Boris Johnson has walked a tightrope between scientific advisors who are pushing for another nationwide lockdown and members of his Conservative Party who warn that such a draconian response would wreck the economy

London to face tougher restrictions under Tier-2 COVID-19 risk alert from Saturday as cases continue to surge
World

London to face tougher restrictions under Tier-2 COVID-19 risk alert from Saturday as cases continue to surge

The tougher measures in Tier-2 impose a ban on mixing between different households, indoors in homes and pubs, bars and restaurants and the Tier 1 rule of six on gatherings outdoors continues to apply