Brexit Struggles

Dark times lie ahead for the United Kingdom.

Technical Analysis
Nov 24, 2017
Brexit Struggles

The bad news for the United Kingdom only seem to pile up ever since the Brexit vote last June. With EU nationals members of the labour force leaving the UK in favor of other European countries, the major decline of the British pound sterling (12% versus the USD), and political instability caused by tough negotiations with the European Union, the economy of the United Kingdom is not what it used to be.

This week several reports were released regarding the UK’s economic struggles. Perhaps the most serious of the news came from the UK Treasury which announced that the United Kingdom has officially dropped out of the top 5 world economies, where it previously held fifth place, behind the United States, China, Japan, and Germany. This finding is rooted in the revised forecasts regarding the growth in the gross domestic product (GDP) of the UK published by the International Monetary Fund. Britain will be replaced by France at the fifth spot and experts expect the difference between the two countries’ GDPs will only widen in the next few years.

In addition, the Office of Budget Responsibility published forecasts about the United Kingdom’s economic growth which are increasingly pessimistic: 1.5% for 2017 (against the original forecast of 2%), 1.4% for 2018, and 1.3% for 2019.

The fact that France, another EU member state, surpassed the United Kingdom can only exacerbate the issues surrounding Brexit. The politicians who pushed for the leaving the EU, including current PM Theresa May, have consistently maintained that the British economy will be better off on its own than as part of the European Union. However, a European country managed to outdo them this year, and the UK hasn’t even left yet, so things are bound to get worse.

Another study by the Resolution Foundation pointed out that based on the predicted growth and inflation, if things continue this way, wages in the UK would not increase until 2025. In other terms, the United Kingdom could be facing its worst economic growth period since the end of World War II.

According to IMF estimates, Britain could be losing 65 billion pounds due to the slowdown. This does not even include the additional payments that the United Kingdom will likely have to make to the EU in order to leave the bloc. Furthermore, Britain is struggling to negotiate proper trade agreements with European countries, which could also cause billions of pounds worth of losses in the coming decades.

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