Estimates put the price of Brexit up to this point at $86 billion. Analysis found that the depreation of the pound, increased inflation, and weak exports has led to a reduction of GDP by 3%, which translates into about $86 billion.
The model consist of creating a basket of counties that when combined with proper weightings matched the UK's growth up till the 2016 referendum. For Example the US makes up 28.4% of the model, Hungary 24.1%, and Canada is 21.3%. This model creates a statistical doppelganger for the UK. After the referendum the UK slowed down while the doppelganger continued on trend.
The £66 billion implies that the country is £1,000 poorer per person. The decline can be seen in in the recent PMI data as well, with a PMI of 50 that implies no to very little growth.
The economic weakness is caused by firms delaying investment spending. Firms are delaying spending due to the high amount of uncertainty around Brexit. Even as deadlines have came and passed the economy is not sure what Brexit will mean for the UK.
It is clear that the cost of Brexit has been high up to this point and it hasn't even happened yet. It is possible that the UK will enter a recession due to the low investment spending created by the uncertainty. Maybe with some clarity around what Brexit means firms will feel comfortable to begin investment spending again and the UK's economy will strengthen regardless of the terms of Brexit.
https://www.businessinsider.com/price-of-brexit-66-billion-recession-2019-4
3 comments:
I find Brexit to be very interesting and the title says it all. The country has lost $86 billion and that is before Brexit has even occurred at all. A depreciating pound and in increase in inflation is not very good for outside investors to purchase British goods because their goods are more expensive resulting in weak exports. This event is unprecedented and outside investors do not what the future holds for the UK. I would try to steer clear in every way from investing in Europe in general over the next year. The fallout from this event will be felt throughout the world.
Interesting read! The analysis regarding uncertainty is spot on, it really harms the market way too much. It should be worth noting that at this point, perhaps the only people really benefiting from this Brexit drama are those of the higher socioeconomic status who have invested their money (real estate, stocks etc) based on algorithmic calculations of Brexit. Uncertainty at this point helps out only those with the control of the trading platform as well as those who have invested (millions) there. In the case of real estate for example, fluctuation of prices leads to increased purchase of appreciating assets, which of course requires a lot of money. Hence, however Brexit plays out, the one thing I believe we can be sure of is that the wealthy class will easily come out on top in any case.
I am amazed that Brexit has now been in the works since 2016. I feel as though they are no closer to a resolution. I think the part that you mention about firms delaying investment is a major expense for the U.K because if my understanding is correct they are waiting to see what the government decides. If they decide to stay with the EU the paused investments may be reinvested in the British economy, but if they decide to leave the investments will go elsewhere. This would only worsen the transition and exiting for the U.K. essentially kicking them while they are already on the ground.
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