The Brexit – Economically A Good Thing For The UK (So Far...)

Whenever people are talking about the Brexit they mostly just name negative consequences without even referring to any facts. Of course we already see some international companies and banks moving their business to other European Countries but that´s not the whole story after all.

What many people don´t know is that at least in the short term the Brexit was actually a huge Benefit for the UK Economy. The unemployment rate went down significantly at the beginning of this year and currently resides at its lowest Point since more than 40 years. Further the international Monetary Fund estimates an overall economic growth of about 2% in 2017, which sets the UK on the second place directly behind the USA.

But What´s the reason for this positive change?
Shouldn´t it actually be the other way around?

The Crash of the GBP lead to Increased Exports in the short run

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The answer to that question is the crash of the GBP value due to the successful Brexit referendum in June last year. The devaluation of the currency has been very bad news for consumers in the UK as they suddenly faced higher prices on many imported products and especially had to spend significantly higher amounts for holidays abroad.

But whilst the Consumers had to suffer amongst the increasing prices it has been a great benefit for the British economy overall as all their produced goods suddenly got very achievable for customers abroad. The prices actually decreased up to 20% compared to the ones before the GBP crash / before the Brexit.

That being said it might be no surprise anymore that the British exports reached all-time highs with an increase of more than 10%. Within the following chart you may see how much they´ve increased since back then.

Outlook – How will it go on with the UK Economy?

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Despite the huge short term benefits for the UK Economy with increased Exports and the lowest unemployment rate since years it doesn´t look that good in the long run anymore.

The fear of a hard Brexit, which would most probably include tolls, import & export taxes, leads to many companies looking for different suppliers within the EU already to avoid negative consequences, like delays or significant price increases, at a later point of time.

Long lasting negotiations between the UK and the EU grant us some more time until the final outcome will be clear. But whatever the politicians will agree on in the end, it´ll not be in favor of the UK economy as it´s very much depending on Imports and Exports from/to other EU countries.