How the Brexit Vote Continues to Affect British Business

The Brexit vote, carried out on the 23^rd June 2016, expressed the British public’s desire to leave the EU. This article will explore how this historic vote has already affected UK business, and predict what its impact will be in the months ahead.

Lowered Exchange Rates

In line with predictions, there was a fall in the value of the pound immediately after the results of the vote were announced, which then caused domestic prices to rise, particularly on imported items. According to the London School of Economics, the drop in value of the pound, as a result of the Brexit announcement, was unprecedented – dropping in one night from $1.50 to $1.33. This was the single biggest drop in daily exchange rates amongst the world’s four biggest currencies since the 1970s.

The Brexit referendum also resulted in a slowing of Britain’s GDP growth. Although the GDP did remain positive, the UK fell from having the highest GDP growth rate in the G7, to having the lowest. Another area that has been affected by the Brexit vote is productivity (which has stagnated in the aftermath of the referendum), compared to a rise in productivity in other OECD countries.

One further consequence of the Brexit referendum is that there has been a drop in UK purchasing power, with wages stagnating across the country. This is coupled with a rise in consumer prices and reduced spending power. However, on the bright side, food prices have mostly resumed low level inflation rates. 

Sahel Majali, Chairman of Mid Group, has publicly offered his opinion on the impact of the Brexit vote, while noting that negotiations will be key to the UK’s future relationships once the process has been completed.

Four Years On

Almost four years since the referendum was taken, the details of the UK’s departure from the European Union have yet to be agreed. As a consequence, analysts have predicted that the UK will see its weakest growth, outside of a recession, since the Second World War.  Despite such gloomy news, inflation rates in November 2019 were at a three-year low, remaining under the 2% target set by the Bank of England.

Brexit Preparations

On the 31^st January 2020 the UK officially left the EU, although negotiations continue with regard to the new trade deal between the two. Businesses continue to face uncertainty, with many businesses that trade with the EU being asked to consider how changes in VAT might affect them; how customs checks and duties may cause changes in the supply chain; and how their principal contracts might be affected.