by Chris Cummins
The result is clear: the UK is out of the European Union. But what does the future hold for the British economy?
The immediate reaction by the financial markets to the pro-Brexit referendum result has been alarming to watch. The FTSE 100 tumbled 9 percent in opening trade on Friday.
‘Black Friday’ for the pound?
In early trade, the British pound plunged from USD 1.50 against the dollar to USD 1.33 – its weakest level since 1985.
— Financial Times (@FT) June 24, 2016
Jeremy Cook, chief economist and head of currency strategy at World First, tells euronews: “We don’t know what is going to happen. There’s going to be a huge amount of uncertainty for the British economy.”
“We know that businesses are likely to hold investment capital spending here in the UK. That means the creation of jobs. So everything that was looking rosy maybe starting to look quite dark.”
‘Recession looks likely’
The UK economy has been faring well in recent times with growth moving in the right direction.
Unemployment is at its lowest since October 2005 – down 20,000 on the previous quarter.
UK inflation is low and things appear stable, but Brexit may change all that, according to Cook.
“I think that the near-term hit at confidence, be it investments or business, or certainly consumer confidence, would suggest that we are likely to see purse strings tightened in the next three months,” he told Euronews correspondent Sarah Chappell.
“And it’s hard to see past a couple, maybe three or four quarters of negative growth. So, yes a recession looks likely.”
— The Economist (@TheEconomist) June 24, 2016
In the immediate aftermath of the Brexit vote, the ratings agency Moody’s has changed its outlook on the UK’s sovereign rating from stable to negative.
Rival ratings agency Standard and Poor’s is also expected to downgrade the UK’s AAA credit rating in light of the Brexit vote, the Financial Times is reporting.
by Chris Cummins – with London reporting by Sarah Chappell