Confidence in the Pound grows thinner years after Brexit
British consumers are facing the harsh economic realities of leaving the EU.
The economic side effects of the sloppy separation between the United Kingdom and the European Union, or what is better known as Brexit, are growing by the day. The British government’s controversial referendum in 2015, was not an amicable split, but rather, a blood bath finalized in 2020. After the impacts of COVID-19, economists are now beginning to differentiate the decision’s consequences.
Nearly two-thirds of the British population believe that leaving the European Union has damaged the British economy, according to a February 2023 poll from The Independent. Both the English investor and everyday Britain face several negative impacts from the country leaving the E.U. Over the past six years, the drawn out departure has affected nearly every element of the country’s economy, including imports, GDP and inflation.
The U.K. receives 28% of its food from imports from the E.U., according to a 2020 U.K. Department for Environment Food and Rural Foods report. Consumers are bearing the brunt of the increased cost of a change in regulatory systems between the E.U. and the U.K. Mitigating tariffs, customs checks and sanitary measures is costing U.K. firms and therefore their consumers about a third more than in 2019. These shifting safety checks are leaving grocery stores bare and Britons frustrated. Regulation shifts are also costing each household roughly €250 more in food bills, summing to nearly seven billion pounds, according to the Centre for Economic Performance. With an increase in regulations and as corporations begin to pass on the prices of their products, Brits are feeling the impacts that Brexit is having on day-to-day life.
Though inflation is on the rise globally, The U.K. has experienced a shocking spike, reaching an over 44-year high of 11% in 2022. Inflation, though a complex trend, is compounding the British government’s struggles as it grapples with other decaying systems in the British economy. Now, the government and Bank of England have faced turmoil by deciding not to raise interest rates in September. For Parliament, maintaining current interest rates may limit the government’s impact on slowing down spending, though these are not the only measures they can take. This decision is limiting the global influence of the country, especially in investments for the future due to the country’s reduction in openness to international trade.
Brexit, since its birth, has correlated with a more volatile economy for the country. One example of this was the initial impact of Brexit in 2017 when consumer prices increased by 2.9% in mere months. Another indicator of consumer’s disdain for the move was consumer confidence, which dropped nearly a whopping 12% between 2016 and now.
Brexit has left many foreign investors and consumers with a lower sense of stability. Recent estimates claim business investment is approximately 10% lower than it would have been without Brexit, according to the Economics Observatory. Though the future looks bleak for British investors, one upside to this change has been for foreign consumers.
As regulations and relationships between the U.K. continue to shift, investors are not sure about putting their money across the pond anymore, leaving the British government more and more at risk for a downward shift.
