EIU Predicts Longstanding Damage To UK Economy From Brexit

A report from the Economist Intelligence Unit (EIU) predicts that the impact of a Brexit will result in an unstable and grim future for the UK’s economy. The report predicts that the UK will slide back into recession as a result of the economic and policy systems getting upended from the exit.

The report titled ‘Out and Down: mapping the impact of Brexit’ has discussed the impact of Britain leaving the EU on a variety of fronts including the growth of the economy, employment and the British pound.

According to the EIU’s report, the UK’s economy will fall by 1% next year if the June 23rd vote results in a referendum that pushes for a Brexit. The report claims that by 2020, the economy would be down by 6 percent over what it would have been if it had remained within the EU as a result of the subsequent disruptions.

Bloomberg

In a statement, Danielle Haralambous, UK analyst at the EIU said

While some of the remain campaign claims may seem alarmist, the fact is that a vote to leave would have a negative political and economic impact. The negotiation process would create a period of uncertainty, both for consumers and investors, sterling would weaken and prices would rise, especially as trading with European counterparts became more complex.

The EIU believes that the exit would lower consumer spending and investments by companies which would push the nation into recession. The report has forecasted that the pound would fall by around 14 or 15 percent and unemployment would increase to 6 percent in 2018, causing 380,000 employees to be out of work than what would have been the case had UK not left the EU. The Brexit would also impact borrowing costs, resulting in the average yield on 10-year government bonds to be higher by 0.6 percentage points in the latter half of 2016 over what it would have been within the EU.

The report has also highlighted the major industry sectors that would be worst hit by the exit. The UK financial service industry would shrink with London’s status as financial hub coming into question. Companies would look to move out of the city to ensure single market access. The retail industry would suffer from complications in its supply chain operations and prices would rise as a result of the pound rising. Sales are likely to fall 3 percent in 2017.

Charlie Harrison

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