The decision of Britain to leave the European Union had emerged as a significant element in the turning of the economy of the UK. The split of Britain and European Union had made a serious impact on the stock markets, flow of investments, value of currency and other economic indicators.
Economists did their analysis of the post breakup with Brussels and stated that it would shake the global economy. As Britain announced their exit on June 23, the world economy experienced several fluctuations in the economic indicators. The immediate repercussions were the fall of sterling, low investments, and downslide of stock markets. The equities, commodities, currencies, stock futures, bonds and stocks were sold off due to fear across the world. There was panic that lead to forced selling by the traders to hedge against the risk. Hence, the sterling plunged to its worst fall against the dollar claiming it as a Black Day.
But Wait… there’s a positive trend emerging
There are two sides to the coin, the positive side of the BREXIT is now emerging; leaving all the concerns behind, the economic index has surged and many indicators are positive. The figures have come across as a sigh of relief for investors and have performed better in the short term than anticipated. The upside of economic figures has emerged as a positive that may set moods of good business sentiment. The analysis and charts are actually not depicting a gloomy story of Post –Brexit; with the result figures, we are witnessing an upside in terms of trade, growth, consumer spending, and business sentiment.
The economic data after split have not shown any sign of economic collapse, as visualized in several charts with positive post-Brexit data points (source: Bloomberg). The early days may have to experience a slow start but the results are reassuring by far. Campaigns declaring a deep economic shock have proven to be false as the share prices have increased. Now, it is visible that consumers have been patient and have ignored the gloomy predictions. The repercussions were exaggerated and are promising for the future of UK. Another segment which has shown signs of stabilization post vote is the housing sector. The market has recovered substantially after June and has potential demand.
Does this indicate a meaningful Business Rebound?
Still so far, markets have not been damaged by Brexit. Long term investors must hold their shares as history indicates that markets recover after financial crisis steadily. The future is challenging ahead but central banks have thought of easing the monetary policies to boost the growth of the nation. It has been done to deal with the uncertainties caused due to the exit of Britain from EU. The Central Bank would act as a shock absorber against any fallout due to uncertainty.
Though today, Britain is experiencing an uncertain period, there are hopes of negotiation deals for faster growth and development of new immigration policies. The markets’ fall was short lived because the index is majorly dominated by the multinational or transnational enterprises, who earn revenue from overseas. The profit is largely related with dollar linked currencies and hence they are shielded by the exit of Britain.
Overall, Britain has recovered from the initial shock but still is in the midst of economic recovery. With political stability, the UK markets have plenty of room to bounce back. With subsequent recovery, investors hope to gain confidence and opt for long term investments. The concern for Britain is the deficit of government budgets; today it needs inflows of funds for investment that may boost the economy upside. Business rebound and improvement in service sector can be the key to success with rise in employment, and higher tax receipts. The efforts should be made to reduce the government deficit that would lead to economic development.