(VOVworld) – After Britons voted to leave the EU on June 23, Brexit, the UK’s economy has been facing negative impacts. Economists predict that the UK would enter a recession in the near future.
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| People walk to work in the City of London (photo: Reuters) |
Brexit would leave a huge impact on the UK’s economy. After the referendum result was announced, the pound, one of the most powerful currencies, dropped to its lowest level in 30 years, at 1.3229 USD at one point. Investors have sold dumping the pound before it plunges further. Economists predict that the pound will crumble from between 14 to 15% in one year, taking away the UK’s position as a global financial capital. They expect big US banks such as the Bank of America, Morgan Stanley, or Citigroup would likely need a new legal home base in other EU countries instead of the UK. Stephen Innes, senior trader at OANDA Asia Pacific said London will lose its status as the global financial capital because foreign banks in the UK will consider leaving the country.
British businesses are facing uncertainty as they don’t know who will be the Prime Minister and what the new economic policy will be. They will delay their investment projects and consumption will downgrade. British businesses will not benefit from free trade regulations as among EU member countries and their profits will reduce greatly. It will lead to bigger government’s budget deficit.
In the long-term economists predict that the UK’s economy will crumble in the next 5 years, losing about 100 billion pound, equivalent to 5% of its GDP. The GDP will reduce from 4 to 10% due to losses in trade and finance. Nearly 1 million workers will be unemployed when hundreds of foreign businesses leave the UK. Expenses on essential goods will increase as the sterling devaluates. Economic losses have become real after Brexit referendum on June 23 and it will take a long time for the UK to overcome this political turning-point.