From a distance, the EU referendum debate (I use the term loosely, having actually taken part in debates) boiled down to the Remain team playing the part of Cassandra with dire warnings of the economic consequences of the UK turning its back on the world’s largest economic block whilst the Leave campaign spoke of greener grass and “taking back control”, dismissing their opponents’ claims a “scaremongering” whilst never actually providing a blueprint for the UK after leaving the EU. Neither team seemed to be aware that a decision to leave (when triggered by Article 50) would put the nation in limbo for two years as the EU and UK disentangle and that only then would the EU consider any UK request for access to the single market. Leave campaigners imagined that the UK would be granted instant access to the single market, at a greatly reduced subscription fee, freedom to pick and choose which EU nationals are allowed to settle and work in the UK and that it would be business as usual since the EU would be crazy to hinder trade with the world’s fifth largest economy…
What are the risks?
Now, the consequences of leaving the EU are emerging. The Pound is flirting with fresh 31 year lows against the Dollar (let’s not talk about its value against the Yen) and its weakest Euro value since 2013 – this says a lot since although the Euro has fallen, only the Pound has taken a dive. Markets have been fluctuating, but catastrophic falls have so far not materialised (since the UK has not activated Article 50 yet), but some individual stocks have taken a hammering (notably banking and construction stocks). Inward investment to the UK has weakened in the course of 2016 and will do so further until the nation emerges from the other side of the crisis; either by changing its mind and remaining in the EU or eventually when its trading position becomes clear (which will take years).
The weak pound means that imported goods (including petrol which is priced in US$) will become more expensive, but exported goods have not been cheaper for more than 3 decades, of course. However, since the UK has been running a trade imbalance, importing more goods than it sells abroad, the deficit is set to widen. Britons holidaying abroad will find that their spending money does not go as far as they anticipated.
A very major risk to the UK economy will be the inevitable loss of “passporting” if the nation triggers Article 50. This deal allows foreign (i.e. non EU) nations with offices in the UK to trade across the 28 member EU as if they were British companies. It will end if the UK leaves the single market which it must do to exit the EU since the EU has made it clear that there can be no discussion of trade deals whilst the UK is still a member of the EU as this violates EU rules – Leave didn’t think of that now, did they?