So far, the UK economy has skipped the worst forecasts of experts and the Remain campaigners. The underlying strength of the economy before the referendum carried it forward during six months. The fall in the total employment and the rise in jobless claims which began earlier, are warning signs of what lies ahead.
Uncertainty is likely to take its toll. The UK government has not presented a clear Brexit plan. They may have wanted to keep the negotiating cards close to the chest, or they are just unsure of what they want to achieve and what the public wants.
Regardless of the reasons, uncertainty has implications. An EU national might think twice before accepting a job offer in the UK and moving there. An entrepreneur that considered opening up shop in the UK could opt for the bustling tech scene of Berlin.
So far, there have been a few well-publicized “votes of confidence”, such as with Nissan’s pledge to stay in the UK or with Softbank’s purchase of ARM. However, these are probably the exceptions and not the norm. With uncertainty coming from the UK against a more unified European Union, these votes of confidence could become fewer and further apart.
The actual triggering of Article 50 could also be momentous. While nearly six months have passed since the historic vote and May has already circled March 2017 as the timing of the official departure notice, the actual move could also have an impact, especially on those that held to hope it could be avoided in some form, either via parliament or via any other means.
All in all, I expect the UK economy to suffer from some sort of “stagflation”: higher inflation due to the exchange rate and much weaker economic growth due to uncertainty. Contrary to Germany or Japan, the lower exchange rate is not really beneficial to Britain, at least not in the short to medium terms.
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