The economic impact of Brexit…..the story so far

britain-eu-everything-must-go-brexit-store-closure-june-24-2016

The Brexit brigade are still trying to delude themselves that everything is hunky dory. However, the reality is that it has dented growth and there are growing signs of an economic slowdown, if not a recession.

Easyjet are blaming Brexit for a fall in profits . And Ryanair, whose also felt the pinch, is now planning to cut back on flights to the UK and move some of its hubs out of he country. Meanwhile the Polish airline Wizz Air plan to roll back from a planned expansion of services operating out of Britain (damn foreigners staying at home and giving jobs to Polish in Warsaw instead!). Meanwhile a travel agent, which collapsed over the last month (leaving a number of tourists stranded and others out of pocket), has blamed Brexit and the drop in value of the pound for pushing the company over the edge.

A weak pound is also expected to push up petrol prices (and thus pretty much everything else gets more expensive), make holidays more expensive, mortgage costs may well rise and pensions will be worth a lot less. Indeed, I won’t advise retiring anytime soon, as annuities are taking a hammering. And spare a thought for pensioners living overseas. Quite apart from Theresa May’s plan to basically use them as pawns in her negotiations with Brussels, a weak pound is making living abroad suddenly very expensive.

A weak pound, does help exporters, such as the UK’s car industry. However, they will be anxious about the possible long term impacts on trade. If the EU brings in any kind of tarrif on them, that’s pretty much their business model gone. Also the manufacturing of most goods these days takes place over multiple countries, many of the parts on UK cars are imported from the continent (so Brexit just made those parts more expensive). So any sort of a trade barrier at Dover, will make it awfully tempting to simply move production to the other side of the channel.

BT-AJ150A_BREXI_9U_20160608144513

Already Renault is contemplating a rise in car prices sold in the UK, while the word round the camp fire is that there’s at least “a 75% chance” of lay off’s in Japanese owned UK based car companies.

Academia enters recession

image

In my line of work we are starting to see the effects, as this article discusses academics report that they are now being frozen out of EU grant funding applications. Funding opportunities are drying up and layoffs are now probably inevitable. And note it will generally be the non-academic support staff who will get the chop. Many leading academics are already contemplating moving to other EU countries. And recall, as I pointed out in a prior post, if an academic walks, the grant money follows him, as its always attached to the academic, not the university. In my own uni we’ve already lost two professors. Now in truth they were thinking of retiring anyway, but clearly Brexit has pushed that decision forward as they no doubt realise that they will struggle to get funding in future.

And its not just academics that suffer. As I’ve pointed out before, clustered around the UK’s universities are many small high tech firms who rely on this research funding and collaboration through the EU to establish themselves and develop new products. A number of them are already starting to scout out locations in the EU in which to move too. Its ironic given how many complain about immigration that one of the effects of Brexit could be Britain’s best and brightest moving abroad to set up companies overseas and create jobs for people outside of the UK. In short, the UK could very well be in the process of of burning an entire generation of entrepreneurs and innovators.

And already we have the Tories subsidy cuts to renewables to contend with. This is believed to have cost at least 12,000 jobs over the last year, with no doubt more redundancies in the pipeline.

The impact on the construction industry

Meanwhile house prices are now expected to level off, perhaps even drop. Already there’s been a slight drop this month in some London districts. And this is not good news for first time buyers, as the likely trigger event for this is a reluctance of banks to lend money, particularly to first time buyers. By contrast, foreign investors will now find it easier to buy property in the UK,given the weak pound (damn foreigners coming over here and investing their money in the country!).

FTSE100_Brexit

This of course means that those in the construction industry are probably the most vulnerable to the immediate effects of Brexit. I’ve heard tales of emergency board meetings at many leading construction firms with said firms deciding to now cancel certain projects now deemed too risky, a hiring freeze in the short term and an orderly downsizing with lay-off’s longer term.

Indeed, already some senior members of staff are loosing their jobs. One funny story I heard, a newly hired exec got the sack days after Brexit, as it meant the cancellation of projects he was supposed to be in charge of. Apparently he voted leave, so he literally voted to be sacked. The only thing he’s “taking control” of is his application down at the jobs centre. I’d laugh, only I’m aware of how many others in the industry have also lost their jobs, or are about too.

Trouble at the border

And of course custom delays in France which is causing traffic chaos in Southern England gives us a taster for how nasty things could get post-Brexit.

_90495472_hi034187888

Basically if the French at any point decide to get arsy because they feel the UK with a weak pound is undercutting their economy, all they need to do so restrict traffic at Calais, which is easily achieved under the guise of anti-terrorism checks or customs checks that they are just very slow to carry out, quickly causing traffic to grind to a halt. In the mean time they simply wave trucks going the other way straight through.

They won’t have to do that very often to quickly make it all but impossible for British companies to export to the continent. And keep in mind this was a quite normal thing back in the bad old days prior to the EU. Any time people went to France (or visa versa) they’d be asked by relatives and friends to get this and that for them. My own memories of family holidays was of us driving back in a car loaded down with hidden contraband. Is this really an improvement?

Over a barrel

All in all you’d have to be incredibly naïve to believe that Brexit isn’t going to have any impact of future trade. And keep in mind that the UK now needs to not just negotiate with the EU, but with the other major trading blocks as well. Many expect the Chinese will do rather well out of this , as they will essentially have the UK over a barrel.

The US too has previously warned of the UK “going to the back of the queue”. While its not clear if they will follow through with this, but certainly if the UK wants a deal quickly they will have to concede a lot. The US is locked in a serious of talks with the EU over the controversial TTIP’s trade deal, something Brexit might well have now derailed. Needless to say, while the EU can haggle, or even walk away from such a deal, the UK can’t. For the UK it will be take it or leave it when it comes to TTIP.

Like a Victorian workhouse

One of the areas where we could see some major changes post-Brexit is when it comes to workers rights, as it is widely expected that the Tories will now use this as an opportunity to gut the protections UK workers have long enjoyed. So I hope every doesn’t mind working on weekends or Christmas, an end to overtime, not to mention it being made easier for bosses to fire workers with little or no notice.

_90484433_sports_direct

And we have a taster for what’s in store given recent reports from Sports Direct. Its boss Mike scrooge Mac Ashley is accused of running a Victorian style workhouse. With workers being paid below the minimum wage, arbitrary punishments for minor infractions, female staff being solicited for sexual favours, children being forced to go to school ill because parents could not take a day off work. We even have one story of a mother giving birth in the toilet at work (and I hope she clocked off for that that one!).

Well you have to give him credit for being ahead of the curve here. As this is likely to be the model upon which many UK firms are run post-Brexit.

Saving face

We were promised by Theresa May that she’d get some concession on immigration as part of Brexit negotiations. However, it is privately accepted that this will be impossible. So officials in Whitehall and Brussels are looking at ways of trying to make it look like she’s gotten something, when in fact she hasn’t.

One proposal is to dust off the very “emergency brake” measures Cameron managed to get. Of course as I pointed out this was mere window dressing. It would only restrict migrant benefits, which is less of a concern to those who are coming over to work and then plan to go home (which of course applies to the vast majority of them). Government in some parts of the EU will be less than keen on this (in effect they are being asked to subsidise the UK welfare state by their citizens paying taxes towards it but not claim any benefits), which means they will either veto such a proposal or insist on some sort of sharing of NI contributions (i.e. some portion of their citizens NI contributions will be passed on to their home state if they leave or return from the UK and start to claim benefits). Existing arrangement along these lines already exist between the UK and Ireland.

So its likely to be just window dressing, that doesn’t actually change anything (other than draining the government’s coffers), but hopefully it will take the Brexit bigot brigade sometime to work that one out.

Advertisements

One thought on “The economic impact of Brexit…..the story so far

  1. Pingback: What about the deficit? | daryanblog

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s