Brexit – a word that has become a shorthand way of saying the UK leaving the EU, merging the words Britain and exit to get Brexit. British citizens voting on June 23 to leave the European Union, with a turnout of ‘leave’ winning by 52%, was a surprise that echoed through the financial markets.
The effect of Brexit
The pound fell severely after the Brexit vote at the end of June. On 24 November the pound was worth $1.25, up slightly since Donald Trump's election victory. The drop in the pound helped exporters but it made foreign holidays more expensive for British tourists and it had also increased import costs for manufacturers.
The currency’s continuing instability has been accentuated by the cut in interest rates and the Bank of England’s economic stimulus measures. Since the vote, the Bank of England has taken a number of steps to boost the UK economy. It cut interest rates from 0.5% to 0.25% in August - the first reduction in the cost of borrowing since 2009 and taking UK rates to a new record low.
There was also a slight rise in UK unemployment to 1.6 million, an 11-year low between July and September. The unemployment rate was 4.8%, down from 5.3 a year earlier, as shown from the Office for National Statistics (ONS) data.
Can UK avoid recession after the BREXIT?
Economists say that Britain’s economy will slow down, but it should not go anywhere near a recession. They also said that the decision to break away from the European Union will benefit companies across the country as they have access to cheaper international markets. Exports will also sky rocket to their fastest rate in nearly a decade- they are tipped to rise by 4.5 percent and 5.6 percent in 2018.
The Organization for economic Co-operation and Development said that things are much better in the short term and that a recession will probably be avoided. But it is still predicted that growth next year will be around half previous forecasts.
Sure, the collapse that was predicted by some might not happen. But a lot of things may still happen and turbulence over the coming few years is inevitable.