Impact of Brexit on UK and the world!
Decades of predictions and anticipations are ready to be weighed on the scale of reality as Britain packs its boxes to bid farewell to European Union. While citizens of UK showed mixed reactions – some happy to feel freed and others busy calculating the impacts that could go negative for them, the world outside panicked. Without further ado let’s take a dig at some of the most prominent impacts of Brexit on UK and the world at large.
Economic impacts:1. Brexit managed to wipe $2 trillion off the global market. This came as a quick blow, maybe due to panic or anticipations of losing further but this really happened. It is said to have gone down $1.50 trillion year-to-date. Huge figures indeed!
2. British pound saw its worst ever day. Right at the early hours of Friday it went from being $1.50 against the US dollar to just $1.33 which made FX traders experience the nightmare of their life.
3. The 8% slump in the pound is a big warning that UK is about to see inflation in days to come with imports costing more than earlier.
4. Poorer citizens of UK will experience economic crisis more than ever as living costs will spike in days to come.
5. Treasury modeling of currency shocks shows that there will be 2.3% increase in CPI which will increase living cost for poor households by 3.3% while the richest people (who constitute 10% of the populace) will see 1.6% increase in living costs.
6. The stock market of London started suffering abrupt loss but regained its stance to stop finally at 199 points or minus 3.1% amid clouds that forecast recession in the coming. UK, at the brink of recession, did not expect such a negative impact.
7. The S&P 500, the broadest index of US stock, went down by 76 points to 2,037 points.
8. France got a tremendous shock with its CAC sliding by 8%.
9. Wall Street is said to have suffered its biggest one-day fall in 10 months. The Dow Jones Index slumped by 608 points, or nearly 3.4 % at 17,402.
10. Japan’s Nikkei Index is being said to be experiencing its biggest fall since the Fukushima disaster of 2011.
11. Moody’s, the credit rating agency, cuts its rating outlook to negative owing to the economic problems caused by Brexit. There are predictions of negative impact on the world economy and Moody is of the view that unless UK negotiates a trade deal that largely replicates its current access to the single market, the rating will continue to be negative. The country is at the verge of being downgraded.
12. Fall in pound has given access to Indian investors to gain property in UK at cheaper rates.
Political impacts:1. British Prime Minister David Cameron tried to retain stability in the government but soon his political position became unsustainable. He announced his plans to leave the position by October. The Conservative party might become shattered with the referendum going totally against their plans and new elections will have to be called for.
2. Geopolitics could go bad in times to come with Cameron gone. From the Labours’s party could rise someone of euroskeptical nature and the ties which they have maintained with US could fail immediately. Boris Johnson could be the next leader if new elections are called for.
3. There could be clash between UK nations and they might lose their unity after all. Scotland and Northern Ireland had supported remaining in the UK since Scots have never been keen on being dominated by the English. There could be more referendum of exists for Independence in times to come.
Immigration:1. UK will gain complete control over its immigration issues. There would be no pestering for open border policies to be burdened with. It would be able to filter and control the number of immigrants it wants to take in.
2. EU nation citizens who are living in Britain and the British people who are living in one of the EU nations will have to update their immigration statuses.
3. Travel costs from EU nations to Britain and vice versa will considerably increase and people will not have easy access to and forth.
4. Companies that operate in EU as well as Britain will have to ensure that they are compliant with the two sets of rules of both the nations.
5. Complying with the norms on each side might not be possible for all traders and hence trade for these companies will come to a halt.
6. UK will still have to accept some immigration if it wants to continue trading with the rest of the EU nations which brings us to think what is the point of exit if the immigration crisis would continue.
Trade impacts:1. Trading will suffer as companies would have to rethink policies in order to meet the set of guidelines of both the sides. They will have to reframe strategies to stay in the trade.
2. British imports will suffer badly and is expected to go down by 25% in the next few years.
3. One third of the Indian investment in the UK is in the IT and telecom sector and now India will have to set up different headquarters for Europe and Britain. Either India could be inclined towards EU or with easier trade propositions from Britain alone.
4. UK, now free to make its own regulations, could be inclined towards making more investment in India – after all India continues to be a great investment destination from the emerging markets perspective.
5. Larger companies, like Tata Group will face the shortcoming of higher tariffs imposed by the EU against British imports.
It is going to take a year or two to complete the paperwork of a formal Brexit but the impacts won’t stop anytime unless Britain goes the Norwegian way to negotiate trade deals. However, since the chances of that happening are very low, we could expect more dent in the pound sterling and slow investment from other nations.
