BREXIT

Toby Dabell Harry Agnew Tara Ambrose Robbie McDermott

In this presentation we will discuss:

• Political parties• Hard or soft Brexit • Unemployment• Interest Rates• Growth Domestic Product• Exchange Rates• Inflation• Independent Analysis• Latest News

The United Kingdoms’ withdrawal from the European Union is widely known as Brexit, a portmanteau of ‘British’ and ‘exit’. Following a referendum held on 23rd June 2016 in which 52% of votes cast were in favor of leaving the EU.

•

“EU has helped keep the peace in Europe for decade”

“The only party fighting to keep Britain open, tolerant and united.”

Help release Britain from EU control so that you and those you love can truthfully say, “We are a free people making our own decisions.”

May: Brexit must produce “a fair deal at home”, not just in Europe

Theresa May: 'I don't accept the terms hard and soft Brexit'

Brexit means BrexitSoft Brexit

Individual deals

Some free movement

Financial trade deals

Keeping some aspects of

single market membership

Hard Brexit

Nosingle

markets

Control free

movement

No customs

unit

No banking passportEssential for

economic growth

Unemployment prediction before referendum

• No triggering of article 50.

• Fears of post-referendum recession from a vote of Brexit prove wrong• Consumer spending strong, unemployment low and the housing market holding

steady (The Guardian, 2016).

• Unemployment fell from 5.1% January 2016 to 4.8% October 2016.• Referendum date 23rd June 2016 (Office of National Statistics, 2016).

• Lowest rate since September 2005.

Unemployment - What has actually happened

(Office of National Statistics, 2016).

• Benefits should of increased in line with predictions • However, predictions showed short term growth outside the EU to be slow – less money for government

• Therefore benefits where predicted to decrease to cover the costs of less government income. • Welfare Budget amounts to 28% of government spending.

• Some families where predicted to lose up to £2,771 a year.

• Experts predicted unemployment to rise• Reduce pressures for wage growth.• Wages between 2.8% and 4% lower• Typical worker £780 (BBC News, 2016).

24th June 2016 - pre prediction.

• An EU exit will raise unemployment and heighten the risk of a "serious negative shock" to the British economy in the next five years (International Business Times, 2016). [May 2016].

• HM Treasury analysis – two scenarios after two years of article 50 being triggered.

• Shock = fall in the pound – around 12%, unemployment to increase by around 500,000 – with all regions experiencing a rise in the number of people out of work.

• Severe shock = fall in the pound – around 15%, unemployment to increase around 800,000 (Gov.uk, 2016). [May 2016].

UN-EMPLOYMENT

Speculators Interest Rate Predictions

• Head of the IMF Christine Lagarde said she could not see ANYTHING positive to come from leaving the EU and an exit could have "particularly severe" consequences.

• Ms Lagarde added that interest rates could also rise sharply in the event of leaving Europe, which would negatively impact on households with high debts.

• The Bank of England under Mark Carney's leadership also warned interest rates could rise, and that a recession couldn't be ruled out.

• George Osborne warned that house prices will fall and the cost of mortgages will rise if Britain leaves the European Union.

In fact, the Bank cut interest rates following the Brexit vote.

How will falling interest rates impact the economy?

Mortgage paymentsThe real winners from a cut in interest rates are mortgage owners, who could see a £22 a month cut in their average monthly repayment bill. This is a significant increase in disposable income during a time of stagnant wages. It can take up to 18 months for an interest rate cut to feed through into the economy (e.g. people on fixed rate mortgages)SaversThe rate cut will impact savers, who will have to work their money harder for better returns. Saving in bog-standard accounts just got even worse.Housing pricesCapital Economics said in its forecast, which factors in a 0.25% base rate, UK house prices should rise by 2% in 2016, 2% in 2017, and 3% in 2018 according to the Guardian

GROWTH DOMESTIC PRODUCT(GDP)

GDP is the Monetary value of all finished goods and services produced within a country’s boarders in a specific time period.

Monetary Value is the monetary worth of an asset, good or service.

British businesses continued to invest.Business investment rose 0.9% in the July-to-September. (forecasted 0.6%)

A contribution to growth from net trade.(Difference between Imports and Exports. Imports fell – Exports grew)Consumer spending continued to be the main driver of economic growth, fuelled by rising household incomes.

Why is there an increase?

PREDICTIONS.

• Many economists prior to the referendum had predicted an immediate and significant impact on the UK economy and consumer confidence should the country vote to leave the EU. But so far these predictions have not come to pass.

• George Osborne and his Treasury, had predicted Britain would fall into immediate recession after a Brexit vote, with GDP coming in at -0.1 per cent in the third quarter of 2016.

• The IMF said Brexit could reduce the UK economy by as much as 9.5%, and added that Britain could expect "sizeable" long-term losses in income.

• However, Britain's economy grew by 0.5 per cent in the three months after the vote, providing evidence that the vote did not cause a negative impact on the UK.

Exchange RatesBrexiters recognised that a sharp devaluation would be almost inevitable after Brexit. On 22 December the pound was worth $1.23 - compared with $1.47 pre-referendum

How it is affecting the UK economy

The price of imported food and other goods is rising because of sterling’s depreciation. And the price of raw materials for UK firms, which tend to be priced in dollars, is also increasing pretty rapidly according to the Independent.

The Bank of England thinks consumer price inflation will spike above its 2.5 per cent target by the beginning of 2018.

This means that the weekly food shop is likely to be more expensive relatively soon.

Some exporters will benefit from the slide in sterling. Their exports will become instantly cheaper on world markets.They could hike sales prices to increase short-term profits.Healthcare companies listed in the UK such as GlaxoSmithKline and British Aerospace's share price hit a new 12-month high.

Inflation• “Because the pound would be worth less, everything we import would become more

expensive, increasing inflation and hurting family budgets” – Mr Cameron and Mr Osborne

• The pound has fallen and inflation is expected to rise, although the effects take time to work through the economy (The Telegraph, 2016).

• As for inflation, November 2016 - 0.6%. December 2016 figures just released – 1.1%.• Highest rate in three years (BBC News, 2017).

• Closer to target of 2% +/-1% set by Monetary Policy Committee of the Bank of England.

What was predicted?

What has actually happened?

Independent analysisIt appears the predictions from the following: George Osborne, Christine Lagarde IMF and Mark Carney's suggested there would be collapse in the economy.

Their point of view which was not clearly set out was:- ‘very flawed and very partisan’ according to a recent Cambridge University study. –

If we leave the EU, the single market dies

Uncontrollable levels of inflation would occur, primarily due to the Tariffs increasing the cost of goods and services.

To tackle higher levels of inflation, monetary policies would have to be used to increase interest rates

Effect – The cost of borrowing increases, Debt increases, house prices collapses and monthly repayments rise.

Result – Less household income which causes reduced spending. Resulting in an economic contraction. Research before the referendum claimed UK household would each loose out by £4,300 a year if the EU membership referendum vote on 23 June resulted in the UK leaving the European Union.

A Treasury document claiming the UK economy would shrink by 6% if Britain left the EU has been criticised by Conservative MPs from the Vote Leave campaign as well as some economists.

This may still occur as Thersa May announced the likely hood of a hard brexit because some factors are non-negotiable

Latest News

Senior

LATEST NEWS

• As most financial markets still believe Britain will vote to remain (regardless of the polls), the impact of a Brexit vote is likely to be considerable. The pound will almost certainly fall significantly, as will share prices, with banking stocks and multinationals hardest hit.

Brexit: Theresa May blames media for misrepresenting her EU comments leading to slump in poundIt comes after her interview with Sky News in which she repeated previous answers about her approach to Brexit

Brexit: Top economist reveals what he thinks will happen next after the EU referendum vote

Brexit: Next warns prices could rise by 5% in 2017 as drop in the pound hit profits