“What now?” is the question we’re all facing, even after 7 months, as either fellow citizens of the United Kingdom or people even remotely concerned with the EU or the UK, after Britain’s divorce from the trade bloc, the salt to the wound added by England’s loss to Iceland at the Euro 2016, equally fresh in our memories…The aftereffects of ‘Brexit’ would be most notably, seen on the frontiers of Trade, The Currency, Immigration, and Culture. All of which are inter dependent in some way or the other. Although neither the government nor the investors or the shareholders, companies or the man on the street knows what’s going to happen in the long run.
Prime Minister Theresa May has broken the mould on the deadline for the start of the official negotiations post Brexit. The two year formal negotiations as mentioned in the Lisbon Treaty will start in March 2017.
For starters, the pound plunged against the dollar to $1.21 as opposed to the $1.41 pre-referendum. As for the Euro, it regained ground to 1.14 euros after falling to a 3 year low against the European currency to 1.09 euros a pound.
Although the fall in value has estimated the exports to go up, it also may increase the real-time cost of import duties. One of the major cases was the standoff between Tesco and its biggest supplier Unilever. The latter hinted it would increase prices to compensate for the drop-in value (BBC). The next “attack“ on the pound is estimated at 31st March 2017 (read “D-day for the GBP”). Till then the exporters can have a joyride as their goods will be cheaper in the international markets and they can hike the prices to make short term profits.
For the layman, Justin King, former boss of Sainsbury’s had prices of goods at the supermarkets and high street shops will rise as the companies cannot absorb the rising import costs and thus will pass it on to the consumers. Outward tourism will be relatively costly and as Britain is a net oil importer you can expect refilling your fuel tank to be more expensive, especially after Prime Minister Theresa May’s trenchant remarks hinting at a ‘hard’ Brexit boasting stubborn brinkmanship.
The crux of the Brexit’s reverberations is its effect on immigration. The myth that foreigners snatch local job opportunities at lower and higher levels that could’ve gone to the Britishers was an influential belief that motivated Britons to vote for the Leave campaign. Diving into the matter, the Centre for Economic Policy LSE, the Institute for the Study of Labor and the Migration Observatory at the University of Oxford all arrived at the same conclusion: That migrants aren’t putting Brits out of their jobs. The statistical data went a step further to establish that employment rate was at a record 74.2% when immigration was high!
Yes, the immigrants do compete for the existing jobs, but they also create more jobs by setting up their own businesses and staffing them. They add demand for British produced goods by consuming their goods and services. The decisions on the fate of the 3 million EU citizens in the UK and the 2 million UK citizens in EU and their businesses is still undecided.
An unfortunate, but accurate prediction to the backwash of Britain’s exit from the bloc was the rise in hate crimes against immigrants. According to Al Jazeera, the number of hate crimes last year’s July to September quarter increased from 10,793 to 14,295. Post referendum many Polish families and individuals experienced a number of incidents including distribution of leaflets calling them “vermin”, a case where a polish man was hospitalised after being beaten by 20 Euro sceptics and another attack in Harlow, near London wherein a Polish man was beaten to death in a suspected hate crime case.
Authorities have commented that people who encourage the extreme right wing fascism and intolerance towards the groups of other nationalities and ethnicities will “face the full force of the law”. We hope…
Now for the biggest upset of all experts’ prediction, the government’s and organizations that predicted an economic shock has not come to pass. Although Brexit’s effects on the economic and fiscal policies of the government has been bittersweet. The fall of the British pound was forecasted to help the exports and tackle the trade deficit. There have been few signs of that happening. Inflation is at 1.2%, the highest since October 2014 as opposed to pre-referendum 0.5%. (ONS) and the Bank of England has predicted a spike to 2.5% by 2018. On a positive note, the travel analytics ForwardKeys commented that the fall of Sterling has made the UK a cheaper destination for tourists and have seen a 7.1% rise in flight booking to the UK. Retails sales have gone up due to the influx of tourists. Economy grew by 0.6% between July and September last year. Way faster than previous estimates (ONS) but something that is not expected in 2017.
As for all of the parties involved, we can hope that the sterling has hit the bedrock and will bounce back and goods will be cheaper again and investors will no longer have to suffer this tribulation, that fascist Brits with intolerance issues will see a *state sponsored* therapist and that Prime Minister May was just joking and that Brexit may be soft or even cuddly.
By: Divyaditya Singh
Westminster Business Consultants 