Effect Of Brexit On Uk 's Domestic Economy

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Introduction On June 23rd 2016 the United Kingdom voted to leave the European Union. This referendum is one of the most significant votes of a generation and will have substantial political and economic consequences for the UK and the wider world. Since the result of the vote, very little information regarding the terms of Brexit has been disclosed by the UK government. This has caused considerable economic instability, resulting in fluctuating currency markets and significant drops in consumer and investor confidence. Despite the general consensus that Brexit will have a negative impact on the UK economy in the long term there may be some benefits for the financial sector, such as a decrease in the stringent financial regulation that…show more content…
When considered in light of the political climate, the falls in the pound are not good news for the UK economy. British consumer confidence dropped sharply in the aftermath of the referendum. In the political and market instability that followed the vote consumer confidence suffered one of its biggest drops in history. The biggest deterioration concerned the general economic outlook in the 12 months following Brexit; 60% of participants felt that the economy would deteriorate, up from 46% prior to the referendum . Consumer confidence is a vital economic indicator and can have significant implications for investor spending decisions. If consumers within an economy are nervous about their future economic prospects, companies will often cut back on production and employment; in terms of the future economy, consumer confidence can act as a self-fulfilling prophecy. In the short term, the instability that has been generated by Brexit is likely to supress business and consumer spending, resulting in lower growth. Initial Effects of Brexit on Global Markets The Brexit result sent shockwaves throughout the financial world; in the hours following Brexit the Asian stock indices fell by approximately 10%. However, markets tend to overact and the initial fall in global stock markets may have been a hasty judgement on the potential impacts of Brexit on the global economy. Although Brexit is a significant global event, the
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