Thu. Mar 21st, 2019

The first symptoms of Brexit

Los primeros síntomas del Brexit

That San Juan 2016 the UK I had to break down in a matter of days. The British had decided leave the EU and everyone feared the worst: a deep economic recession that would plunge the United Kingdom into misery. Two and a half years later, on the verge of materializing Brexit, the data shows that there was no such thing. The fifth economy in the world has weathered pressures and uncertainties although some sectors are beginning to show signs of weakness.

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Life goes on

In practice, nothing has changed during these two years. The commercial and financial rules have remained intact, although uncertainty has taken over all the decisions. The behavior of the UK economy has been a reflection of this, says Elsa Leromain, a researcher at the London School of Economics specializing in the effects of Brexit. The data shows how the economy has expanded these two years, although at a lower rate than before the vote (it grew to more than 2%). In 2016, GDP increased by 1.8% and in 2017, by 1.7%. This year, analysts predict positive results but worse.

The labor market, like a shot

The United Kingdom did not register such a low unemployment rate since the 1970s. Only 4% of the active population does not work, a percentage that has fallen by one point since the referendum. The figures are "surprisingly good," says Howard Archer, director of economic analysis at EY ITEM Club, an organization specializing in economic forecasts in the UK. In addition, the figures are even better if one takes into account that the majority of jobs that have been created are long-term. "The results reflect the good performance of the economy and the commitment to hire more people to increase their own production, instead of investing in research and innovation," explains Archer. But Leromain is more skeptical with these results because, he says, many of these new jobs are precarious.

The investment of the companies has fallen and the majors have transferred assets to the continent

Fall of investments

With a scenario of expansion and full employment, the braking of the investment of British companies is a key indicator that shows how uncertainty has affected the British business fabric. Investments in the first three quarters of 2018 registered consecutive drops (not since the crisis) and globally, since the referendum until now, investment has grown by only 2%. According to Archer, this investment caution will hurt the productivity and innovation of British companies.

Capital flight

A report made public this week by the consultancy EY, says that the main banks and financial companies have already moved to the continent assets worth at least 900,000 million euros. In addition, the report says that many of the big companies have opened offices in the EU (Dublin, Luxembourg, Paris) and created around 2,000 jobs in the EU to protect themselves from volatility and uncertainty. Banks such as Deutsche Bank, Goldman Sachs or Citi have already moved parts of their business outside the United Kingdom.

Less people arrive ...

With the uncertainty surrounding the treatment that foreigners living in the United Kingdom will receive when the Brexit materializes, it is not surprising that the arrivals of migrants have fallen since the day of the vote. However, the data shows that more people are still arriving in the United Kingdom than they are leaving. And part of that is thanks to the non-EU citizens, who especially landed in the archipelago in 2018 without thinking too much about the post-Brexit scenarios. The fears that have invaded the EU have not crossed borders.

... And less talent

If the United Kingdom is the second economy in Europe, it is thanks to the talent it has generated and managed to capture from the continent. The concern that Brexit has generated has also diminished the arrival of community students in British universities. According to the Russell group (consisting of 24 reference centers, including Cambridge and Oxford), the number of EU students enrolled in the 2018-19 academic year has grown by only 1% compared to the previous year, while the enrollment of graduate students have dropped 5% and postgraduate research 9%.

GDP continues to grow, unemployment is at a minimum but the consumer is uncomfortable

The pound is weak

One of the main victims of Brexit has been the pound. Overvalued before the referendum, it collapsed suddenly in the following days and has not recovered since then due to doubts about the future commercial relationship of the United Kingdom with the EU. But political uncertainty does not have to be bad for everyone. "This fall has benefited British companies, which can now export more easily. If the main British stock market index, the FTSE 100, has grown since the vote until now it is thanks to this factor, as well as to the good results of the companies listed in this index, which by the way, most are foreign, " Archer

Life is more expensive

The depreciation of the pound increased the cost of importing many goods, which has caused increases in the final price of the products, says Leromain. If inflation in June 2016 was at 0.5%, at the end of 2017 it exceeded 3% and is now around 2.5%. Life is more expensive for the British, although for the first time in a decade, wages this year have grown faster than inflation has.

The consumer, discouraged

Since the referendum, consumer confidence in the national and family economy has been falling to the bottom this December. Consequence of this is the fall in consumption in key areas. Car registrations in the United Kingdom fell by 6.8% in 2018, (the second consecutive year of declines) and this December, sales to the final consumer stagnated, the worst results since Christmas 2008, according to the Consortium British Retail. The rise in house prices also shows some slowdown.

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