BY RSH Inc IN RSHinc On 06-08-2016
As of June 24th, Britain officially voted to leave the European Union(EU). A vote which most did not expect and caused near-immediate economic turmoil with the GBP falling to a 31-year low of 1.31 versus the U.S. Dollar; along with a global stock market plunge. U.S. Markets plunged nearly 900 points the following two days of the vote, with the U.K. market plummeting 10%.
Prior to Brexit, U.K. GDP Growth rates were predicted at 2.5% for 2016, and 2.7% for 2017 as seen by the graph above. These rates since have drastically changed though as seen by the below graphs, with 2016 posting a growth rate of only 1.4% a reduction of 1.1% from the original UN expectations, and 2017 posting a growth rate of 0.3%, compared to initial expectations of 2.7%
Beyond the above listed reductions in GDP Growth, the GBP is widely expected to weaken against the USD with the consensus being it will go as low as 1.28, a fall by another 4%. This can be seen in the image below which includes the forecasts for the following week, month, and quarter.
With all of this projected economic weakness, many are doubting Brexit will happen at all. Nordea, a Swedish Financial Firm has given it a 30% of happening while Hans Jorg Schelling, Austria’s Finance Minister believes Britain will definitively decide to remain, instead pushing through a second referendum vote which will result in Britain staying. Since the initial vote, many are already pushing a re-vote due to claims of low voter turnout and general vote misunderstanding; one petition on the Government’s official website calling for a second Referendum vote already has over 4 million votes and counting since its creation with many pushing to remain.
As it stands now, until Article 50 is enacted by the new Prime Minister, which officially dictates the requirement for re-negotiations with the EU, the UK’s Status, and the period through which everything must occur (Two years); the UK’s status will not officially change, and all current proceedings are insignificant and subject to change.