The UK economy has reacted to the uncertainty both in the run up to the UK referendum and subsequent to the vote to leave the EU.
This extended uncertainty is now expected to continue for at least two years, the period of exit negotiations.
The uncertainty caused by the referendum has undermined confidence in the UK. Latest figures show that consumer confidence has dropped to -1.7, while business confidence dropped to -5 in July. This fall in confidence will translate in consumers delaying major purchases and businesses delaying major investment decisions. This, in turn, results in a slowdown of growth, which further fuels uncertainty. Growth forecasts have already been downgraded, from 2.5% for 2017, to 0.4%.
In addition, the value of sterling has dropped sharply since the Brexit vote, although some ground was regained in the following days. This will push up the price of imports, although exports will become more competitive.
The UK’s trading relationship with the EU will not be clear until negotiations are completed but, in the meantime, the UK is still part of the single market, and opportunities within this market are also greater, due to UK goods being relatively less expensive than goods priced in euros.
To read further analysis of the current economic climate, click here.
Sarah Baker, Senior Analyst
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