60 seconds with Azad Zangana on the impact of Brexit on the UK economy
What does the referendum result mean for the UK economy?
24 June 2016
It is an historic moment for the UK and for the European Union. The UK will now enter a prolonged negotiation for at least two years from around October onwards, once David Cameron is replaced as prime minister.
Through this period we are going to see a huge amount of uncertainty around the UK’ s relationship with the European Union, with regards to trade, investment, migration and of course subscription costs as well.
Impact on investment, employment and sterling
In the short term, we are likely to see companies cut back investment, really just to wait to see whether they can find more details around how the UK’s relationship will progress going forward. And of course that will mean a negative impact on GDP growth.
Households are also likely to suffer from a reduction in employment growth or maybe even job losses as well, related to Brexit.
And of course we have already seen sterling take quite a big hit. That is going to feed through into higher import prices and higher inflation, which will also reduce demand.
BoE may cut rates if growth falters
So, overall, weaker GDP growth for the UK and higher inflation. The Bank of England may react with interest rate cuts. I think that would be very positive, but we are not forecasting a recession at this stage, just a slowdown in growth.
- Azad Zangana
- EU Referendum
Important Information: The views and opinions contained herein are those of Schroders’ Investment team, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. UK: Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA, is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored. Further information about Schroders can be found at www.schroders.com US: Schroder Investment Management North America Inc. is an indirect wholly owned subsidiary of Schroders plc, a SEC registered investment adviser and is registered in Canada in the capacity of Portfolio Manager with the Securities Commission in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan providing asset management products and services to clients in Canada. 875 Third Avenue, New York, NY, 10022, (212) 641-3800. www.schroders.com/us