The economic impact of ‘Brexit’

[Independent voter]

So some investment companies are examining the impact of a Brexit. They say it's pretty likely that the UK and EU will sign a free trade treaty soon after. Treaties take a long time usually though.

The report basically says a Brexit won't have a huge impact. I think that's what they are saying.

I still think a Brexit won't happen but it's interesting to think about "what ifs".









Really really long report you can find here

https://woodfordfunds.com/economic-i...brexit-report/

Overall

Although the impact of Brexit on the British economy is uncertain, we doubt that Britain’s long-term economic outlook hinges on it. Things have changed a lot since 1973, when joining the European Economic Community was a big deal for the United Kingdom. There are arguably much more important issues now, such as whether productivity will recover. The shortfall in British productivity relative to its pre-crisis trend is still over 10%, so regaining that lost ground would offset even the most negative of estimates of Brexit on the economy. Based on assessing the evidence, we conclude that:
–The more extreme claims made about the costs and benefits of Brexit for the British economy are wide of the mark and lacking in evidential bases
–It is plausible that Brexit could have a modest negative impact on growth and job creation. But it is slightly more plausible that the net impacts will be modestly positive. This is a strong conclusion when compared with some studies
–There are potential net benefits in the areas of a more tailored immigration policy, the freedom to make trade deals, moderately lower levels of regulation and savings to the public purse. In each of these areas, we do not believe that the benefits of Brexit would be huge, but they are likely to be positive
–Meanwhile, costs in terms of financial services, foreign direct investment and impacts on London property markets are more likely to be short-term and there are longer-term opportunities from Brexit even in these areas
–It is not likely that any particular region or regions of the country would be more adversely affected by Brexit than the country overall. Likewise, we do find support for the notion that Brexit would benefit some sectors more than others, but the range of outcomes for production / manufacturing industries is probably wider than for services

We continue to think that the United Kingdom’s economic prospects are good whether inside or outside the European Union. Britain has pulled ahead of the European Union in recent years, and we expect that gap to widen over the next few years regardless of whether Brexit occurs.

Summary: A more tailored immigration policy

It is likely that, after Brexit, Britain would not agree to the free movement of labour with the European Union. Policy would change to restrict the number of low skilled workers entering the country and shift towards attracting more highly skilled workers (including from outside the European Union). This would be a potential headache for low-wage sectors heavily dependent on migrant labour, such as agriculture, but could benefit other sectors with a shortage of highly skilled labour. Overall, policy would shift to be more specifically designed for Britain’s migration requirements.


The benefits of leaving

Even if Britain’s overall trade with Europe did suffer, it is quite easy to imagine these losses being offset over the long term by the opportunities, created by leaving the European Union, to boost trade with other countries. In recent years, export growth for the United Kingdom has, in the main, come from outside the European Union. Over the coming years, economic growth is likely to be much stronger in the rest of the world than in the European Union. Brexit would therefore give Britain a crucial opportunity by allowing it to broker its own trade deals with non-European Union countries. This is not currently possible under European Union membership, as any trade negotiations can only be carried out for the Union as a whole. There remain large areas of the world with which the European Union has not reached a free trade agreement. (See Figure 14.)


Summary: A short-term threat by a long-term opportunity

Overall, financial services have more to lose immediately after a European Union exit than most other sectors of the economy. Even in the best case scenario, in which passporting rights were preserved, the United Kingdom would still lose influence over the single market’s rules. The City would probably be hurt in the short term, but it would not spell disaster. The City’s competitive advantage is founded on more than just unfettered access to the single market. A European Union exit would enable the United Kingdom to broker trade deals with emerging markets that could pay dividends for the financial services sector in the long run.

Summary: Benefits from Brexit, but not a game-changer

Brexit is only likely to have a limited impact on Britain’s productivity. The major potential for improvements comes from increased business investment, which shows little connection with these political developments. Estimates that axing European Union regulations would save Britain a lot of money exaggerate the true picture, as the United Kingdom would still choose to implement a lot of them. It would also need to implement the Union’s regulations to continue to export easily to the single market. Reduced regulation might give a small boost to productivity but wouldn’t be a huge boon.

Summary: Initial disruption then business as usual

We could see a period of weaker foreign direct investment inflows as the United Kingdom’s new relationship, including the tariff structures, is renegotiated. But if (an admittedly uncertain “if”) Britain is able to obtain favourable terms, foreign direct investment would probably recoup this lost ground.

Consequently, concerns about a drying up of foreign direct investment if Britain votes to leave the European Union are somewhat overblown. Access to the single market is not the only reason that firms invest in Britain. Other advantages to investing here should ensure that foreign firms continue to want a foothold in the country. Accordingly, we still think that Britain would remain a haven for foreign direct investment flows even if it was outside the European Union.


Summary: Cost-savings from Brexit

The British government could save about £10bn per year on its contributions to the European Union’s budget if the country left the bloc. This figure could be higher if either the British rebate was to be threatened in the years ahead or Brexit was to result in overall faster economic growth.

Overall, though, the likelihood is that the savings will be somewhat less than £10bn because there are a number of factors that could reduce them. A little economic disruption and lower migration as a result of Brexit could offset them. The government might also continue to make some contributions to the Union if it wanted to preserve single market access, it might need to compensate sectors of the economy and specific regions that currently benefit from European Union handouts and it may have to sacrifice customs duties income to strike new trade deals with countries outside Europe.

We expect that Brexit will benefit the public finances, but not to a huge degree.


Summary: Small property downsides, small consumption upsides

It seems clear that the City is the part of the British property market that has most to lose if the United Kingdom opts to leave the European Union. It is certainly possible to tell a story in which the damage done could be considerable but the role of the financial services sector in holding up the property market is probably overstated, leading us to believe that any negative impacts will be small, certainly at a macroeconomic level.

We anticipate that the impacts on the property market overall and on aggregate consumption in the economy will be limited. In the case of the latter, they may well be positive due to beneficial effects from independent policymaking on immigration, trade and regulation, as well as savings to the exchequer (which may then be disbursed in the form of lower taxes).

Ultimately the issue is likely to hinge crucially on the terms that the United Kingdom can negotiate in the event that it does decide to leave. In turn, that may well depend on how the government’s attempts to negotiate European Union reform are received and how fearful leaders on the continent are that if Britain was to vote to leave that could set an unwelcome precedent for others.

[Kalis]

About 90% of UK economists say Brexit will be bad for the UK economy.
About 5% of UK economists say Brexit will be good for the UK economy.
About 5% of UK economists say Brexit will be neither good nor bad for the UK economy - Neil Woodford fits into this group.


Why not put this into the 70 page Brexit thread?

[Independent voter]

About 90% of UK economists say Brexit will be bad for the UK economy.
About 5% of UK economists say Brexit will be good for the UK economy.
About 5% of UK economists say Brexit will be neither good nor bad for the UK economy - Neil Woodford fits into this group.


Why not put this into the 70 page Brexit thread?

I can't keep up with all of the rules.

[Kalis]

I can't keep up with all of the rules.

We have no rules in threads about the UK. None of the mods understand half of the language we use, so it is a flame bait free-for-all.