The Effect So Far
There is a lot of debate about whether Brexit will damage our economy or improve it. In the two years since the referendum, economists estimate that the economy has taken a hit of around £30 billion a year. Businesses are also hesitant to invest British, as we don’t really know what’s going to happen in the next few years. It’s not looking fantastic at the moment, but will the economy improve?
A big argument for voting for Brexit was to save money on our payments to the EU. But if our economy gets too much worse, the money we ‘saved’ will just be used to shore up the downward trend. That’s not to say we won’t save money. Economists estimate we should have hundreds of millions a week extra to spend on the NHS and other priorities, which sounds like a pretty hefty sum.
One of the greatest financial impacts of Brexit will be who you work for and where you live. If your employer benefits from EU regional policy they may lose money. The areas most affected by this are West Wales, Cornwall and the Isles of Scilly. Farmers and universities that have research grants from the EU could also lose money when Brexit happens.
The big question is whether we can replace these sort of funds (around £6 billion a year) with domestic spending.
George Osborne, the former Chancellor of the Exchequer, claimed that house prices could fall by as much as 20% after Brexit. This is great news for anyone looking to buy property for the first time, but bad news for anyone already on the property ladder. But it’s hard to know whether our incomes or taxes will also shift to mean that housing prices will still be relative.
Brexit will also most likely resulting in migration levels going down. In some areas, this will mean less pressure on housing and public services.
A no-deal Brexit is likely to affect interest rates offered by UK banks. Fluctuations in the Bank of England base rate could have a knock-on effect on mortgages, credit cards, savings and even loans!
Each month the Monetary Policy Committee (MPC) decide if the Bank of England base rate should rise, fall or stay the same. The base rate is used as a benchmark for interest rates and influences interest paid on loans and mortgages and interest earned on the saving account.
In the wake of the Brexit vote, the base rate was cut to 0.25% (previously 0.5%) and remained at that level from Aug 2016 to Nov 2017 when it rose back to 0.5%. As of August 2018, the base rate rose to 0.75%. Though this higher than the pre-Brexit vote, historically the rate is still very low.
Less migration will also have an impact on jobs. How refugees affect the country’s finances won’t change with Brexit, as this has little to do with EU membership, but lack of migration could have both positive and negative economic effects.
There is no real evidence that EU migrants have led to lower wage levels, so these may not change too dramatically. A lot of public services do rely on EU workers though, so there may be an economical drop in areas like education, healthcare and law enforcement.
However, we might be taking a hit to our economy at the moment with the money that some EU migrants send home. There is no real data about how much this impacts the UK, but after Brexit, this factor may be less of a loss for our economy.
Around 12% of the demand for UK goods and services comes from the EU. This works out to be about 3.3 million jobs. Despite what some people are saying, Brexit will not mean the loss of this many jobs. Some sectors will be hit, but equally, there are some industries which will have an increase in jobs after we leave the EU.
London is likely to see a loss of jobs, and many major exporters like car manufacturers could be forced to cut back, as they may have trouble exporting to the EU.
Doom and Gloom?
There will be a lot of change after Brexit. There will be fewer jobs in some areas and more jobs in others, like the digital and creative industries. Housing costs may be affected, and lots of money will move around in the public finances. But there is no real way of knowing how much it will be a positive change and how much will be bad. As scary as it sounds, we are just going to have to wait and see.
Sensible spending is an approach that all of us at PiggyBank are in favour of. We are a payday loan direct lender, and our service is designed to offer responsible lending to those who are in need of short-term loans and able to pay back within fixed and agreed repayment terms.