+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

The economic damage from Brexit has been fast and widespread

Aug 10, 2016, 17:27 IST

Dracula Has Risen from the Grave (1968) / Warner Bros.

Economics usually moves very slowly. It can take months or years for economic cycles to play out. And it is rarely obvious what causes them - economies are influenced by hundreds of confounding variables.

Advertisement

But not in the case of the UK and Brexit.

The effect of the EU referendum is going to provide economists with a crystal-clear textbook case on what happens to GDP when it is exposed to a sudden, negative shock via political uncertainty.

What is most alarming is the speed at which the UK is heading into recession. Sometimes, recessions unfold in slow motion. For instance, the 2012 double-dip recession was so difficult to detect that economists later revised their data and decided it did not actually exist.

But this recession is like watching Christopher Lee get staked through the heart in a horror movie. One moment he is alive, full of bloody health. The next he is crumbling into age and dust.

Advertisement

The economy went from growth into contraction in a matter of days. Growth was up 0.6% on a quarterly basis through the three months to the end of June. The referendum was held on June 23. And then, in July, the economy contracted 0.2%, according to the National Institute of Economic and Social Research (NIESR).

Before Brexit, the UK saw record-high employment, at over 74%, record-low unemployment, at 4.9%, and healthy annual GDP growth of 2.2% in Q1.

That high-water mark was already in the rear view mirror by July.

The damage is widespread.

Advertisement

The pound - reflecting the future expected strength of the British economy - plummeted like a stone the day after the vote:

Already, £30,000 (5.6%) has been knocked off the price of an average property in London (£527,349) in July, according to the estate agent group Haart. "The equivalent of about a £1,000 drop every day last month," as the Guardian put it. Nationally, prices went down by 0.9% to £233,254. Rents are falling as well.

In the month prior to the Brexit vote, Haart reported, UK prices were up 0.8% from the prior month and they were flat in London (-0.2%).

Declining prices sound like good news for lower income people who need a place to live. But it suggests that their wider economic prospects are bleak: Falling prices are a signal that money is leaving the market, not entering.

Advertisement

NOW WATCH: A self-made millionaire describes the financial mistakes to avoid if you want to get rich by 30

Please enable Javascript to watch this video
Next Article