Martin Belam 

One month on, what has been the impact of the Brexit vote so far?

It is a month since Britain voted to leave the European Union. What difference has it made to our economy and society so far?
  
  

Vote Remain and Vote Leave posters side-by-side
One month into the process of leaving, the potential consequences are becoming clearer, though there is still much that we do not know. Photograph: Danny Lawson/PA

The EU referendum campaign was marked by a lot of claims about what would or wouldn’t happen after the vote. What is clear is that the decision to leave the union will have far-reaching consequences for all areas of British society and the economy for years to come.

Measuring what has happened will take time as a result of the complex nature of collecting and processing the data that will tell us what has happened. One month into the process of leaving, here’s what we know and don’t know about the effects.

What we know so far

FTSE 100

The FTSE 100 has shrugged off a brief post-referendum dip, and is currently at levels not seen since August 2015. But there is a caveat – many companies on the index generate their revenue overseas, and so the fall in sterling will boost their earnings power. Also, the index’s recovery is much less impressive if you price it in dollars.

FTSE 250

The FTSE 250 includes a greater proportion of companies that derive more of their income domestically, and has not recovered as strongly as the FTSE 100 from losses the morning after the referendum. Nevertheless it is still at a comparable value to much of last year.

Value of the pound

The pound was worth $1.50 on 23 June. It is now trading at around $1.30 – down about 13%. Sterling has not been at levels this low against the dollar since the mid-1980s.

The pound has also lost ground on the euro. On 23 June the pound was worth €1.30. It is now trading at around €1.19.

Bloomberg reported on 8 July that the pound had overtaken the Argentinian Peso to become the world’s worst performing currency in 2016.

However, a lower pound makes exports more competitive, and some analysts have suggested that the pound was overvalued prior to the referendum in any case.

Economy appears to be shrinking

Markit’s PMI report on Friday suggests that the UK economy is shrinking at a quarterly rate of 0.4%. It is our first good look at data based on July, and shows an economy contracting at its fastest rate since 2009.

Services and manufacturing sectors have both suffered a big hit, reporting that output and new orders have fallen this month.

Interest rates

Despite some expectations of a cut, and the former chancellor George Osborne’s claim that a vote for Brexit would drive up mortgage rates, interest rates have been kept at at 0.5%, where they have been since May 2009.

New cash for the NHS

There has not been a penny of new funding announced for the NHS after the referendum vote. With the actual day of Brexit still possibly years away, it will be some time before any possible benefits are passed on to the NHS.

The website What Does Boris Owe? has calculated that the Vote Leave £350m campaign poster promise would so far be worth more than £1.3bn additional investment in the NHS.

New trade deals

There have not been any new trade deals. Liam Fox has taken up a position as secretary of state for international trade and president of the board of trade in order to develop new international trade. Iceland, India, Australia, New Zealand and Ghana are among the nations reported to have expressed interest in a deal. Mexico has gone as far as writing a new draft trade deal.

Race hate crimes

Reported incidents of race hate crimes increased by 42% in the week before and the week after the vote to leave the EU. These figures need some context, however. Race hate crimes on public transport were already reported to be rising, and the referendum result may have simply made everyday racism more noticeable to the media and public.

The presidency of the council of the EU

Although Britain will almost certainly not have actually left the EU by July 2017 when it was due to assume presidency of the European council, it has been decided that the UK will not take up the role.

What we don’t quite know yet

Inflation

The latest inflation results for June 2016 indicate there was a 0.5% rise in the consumer prices index. This compares prices in June 2016 to prices in June 2015.

Next month’s release, due on 16 August, will be the first to show us what inflation was like in a month fully after the referendum vote.

Housing and property

The Bank of England’s regional agents survey found that there was a dip in housing market activity after 23 June, but that transactions had so far proved to be more resilient than some had expected.

UK average house prices had increased by 8.1% in the year to May 2016. It will be September before ONS data on average house price movements begins to cover the post-referendum period.

The Royal Institute of Chartered Surveyors has recently reported a significant drop in confidence and investor demand affecting commercial property since the referendum.

Unemployment

The most recently published unemployment figures show there were 31.7 million people in work and 1.65 million people unemployed. However, these figures are based on comparing the three months to February 2016 and March to May 2016.

November will be the first time we see unemployment figures fully calculated post-referendum, comparing July, August and September 2016 with the months prior to the vote.

What we won’t know for some time to come

Will there officially be a Brexit recession?

The first estimate of Q3 GDP figures that will cover July-September, will not be available until late October. That’s when we will start to know if the leave vote has tipped the economy into recession. The Bank of England didn’t think that had happened, which contrasts with Friday’s Markit survey, but there were already signs the economy was slowing down before the referendum.

What is the impact on immigration?

In the year ending 2015, net migration stood at 333,000. The next figures are due in August, but will only include migration statistics up to March. The February 2017 ONS release will be the first to include migration changes post-referendum.

When will the UK actually leave the EU?

The prime minister, Theresa May, appears to have indicated that the UK will not invoke article 50 this year. There is currently a case before the high court arguing over who has the actual power to invoke article 50.

What is the cost of Brexit?

The newly set up Department for Exiting the European Union won’t come for free. In PMQs this week, Tim Farron asked about reports that the department would be hiring lawyers “at a cost of £5,000 per head per day”.

What might happen next

The warnings of the economic consequences of the vote have been modified since it took place. It hasn’t been the baptism of fire that many expected for the new chancellor. Nevertheless, there is still concern from global financial institutions about the impact of Brexit on the world economy.

The IMF predicts the UK economy will grow 1.7% in 2017, 0.9 percentage points lower than it estimated in April. But if the referendum campaign has taught us anything, it is that predictions about what would happen after a leave vote were tricky to get right.

 

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