Brexit

60 seconds with Azad Zangana on the impact of Brexit on the UK economy

What does the referendum result mean for the UK economy?

24/06/2016

Azad Zangana

Azad Zangana

Senior European Economist and Strategist

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.

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