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How Britain's economy suffers from Brexit chaos

2019-09-03T18:46:23.997Z

The political chaos in Britain is increasingly shining on the economy. Industrial production is shrinking, the pound price is slipping. The Brexit hardliners make themselves from this still success stories.




United Kingdom and Gibraltar European Union membership referendum

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British politics is staggering and the economy is staggering. Even before this Tuesday, the next major exchange between the government and the Parliament began, the exchange rate of the British pound in the morning slipped below the mark of $ 1.20. For comparison, on June 23, 2016, the day of the EU referendum, the pound was worth $ 1.47. In the case of a no-deal Brexit, some experts warn, it could even go down even further for the British currency.

Brexit supporters like to argue that British exporters benefit from a weak pound as their commodities become cheaper in the rest of the world. That's true theoretically. In reality, however, this effect is undermined by the fact that Britain relies heavily on importing goods. In 2018, the current account deficit was £ 31 billion. The country, especially in the trade in goods of all kinds each year a huge deficit (138 billion pounds). This is only offset by a large surplus in services (£ 107 billion).

Higher spending on consumers

The consequences of the collapse of the pound are therefore already affecting the British economy, for example through higher living costs. Former Secretary of State for the Treasury, Nick MacPherson, told the Financial Times recently, "The weakness of the pound has given rise to enormous risks, all the more so since recent devaluations have contributed little to exports while significantly lowering living standards." Some time ago, researchers at the London School of Economics came to the conclusion that the average British consumer household had higher expenditures of 404 pounds a year in mid-2017 due to the Brexit.

Even the manufacturing industry is currently struggling with serious problems: The industry has recently suffered the heaviest losses in seven years. According to a report by the financial information service IHS Markit and the industry association CIPS, the so-called purchasing managers index fell in August to their lowest level since July 2012. According to the report, many customers in EU countries have moved their supply chains away from the United Kingdom to reduce the risk of supply problems in the case of a disorderly Brexit. At the same time, orders from the US and Asia have slowed down due to the global slowdown in the economy - suggesting how problematic the London government's efforts could be to conclude trade agreements with the US and Asian countries after Brexit.

Phil Noble / REUTERS

London skyline: "chaos, delays and higher costs"

"Without overthrowing an agreement from the EU, would lead to chaos, delays and higher costs for our importers, exporters and their supply chains," warns Neil Foster of the union GMB. The government must work to restore confidence. "Instead, ministers with their ruthless approach are risking more and more decent jobs in the manufacturing sector."

The construction boom is over

Uncertainty is also increasingly affecting the construction sector . For example, IHS Markit reported on Tuesday that construction companies are seeing the sharpest drop in new orders since March 2009 - when the UK was in recession because of the financial crisis. Accordingly, May was the fifth month in a row in which the number of new orders dropped. The construction sector seems to be shrinking since the beginning of the year.

However, Brexit does not yet have mass dismissals: for since the EU referendum three years ago, so many East European workers have left the country that there is a great shortage of workers in the construction industry. Apparently, the construction companies therefore prefer to cling to their employees, instead of standing without workers after an end to the crisis.

How to knit a Brexit success story from all these bad news, shows the "Daily Telegraph": The newspaper has since the EU referendum three years ago turned into a kind of battle sheet for Brexit hardliners. The newspaper admittedly admitted in an article that house prices could fall by up to 20 percent in the coming year after a no-deal-Brexit. But this has probably more to do with "the slowing real estate market" and problems in the affordability of real estate than with the Brexit.

Even more: A slump in house prices would open up opportunities for first-time buyers. Because they would then be able to afford apartments in cities like London.

Everything is so wild. Keep calm and carry on.

Source: spiegel

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