It’s been almost 2 months since the UK voted to leave the European Union and since the fallout, the UK has seen the departure of Prime Minister David Cameron, and UKIP leader Nigel Farage, a sharp decline in the value of the pound and a fallout with other European states. Farage and his party promoted a brighter future outside the EU and played on the scepticism and frustrations that resonated with many Britons. However, following the successful vote for leave, the leader who many considered would take responsibility for leading the newly ‘Independent UK’ into the new era resigned shortly after the win. Incidentally, it looks like Farage is temporarily back at the UKIP helm after Diane James quits after only 18 days. Newly appointed Prime Minister Theresa May has stepped up to the challenge to lead Britain into a new era, however there’s still uncertainty about what will happen and the UK economy is set to feel the pinch.
Initial unemployment figures are promising, however the future still looks bleakAccording to Trading Economics, the unemployment rate reached 4.9%, which is the lowest point since March to May of 2008. However, the Bank of England is predicting up to 250,000 job losses and believes that the unemployment rate will jump from 4.9% to 5.6% in the next 2 years.
Minimum wage costs to remain, despite promises of a wage increaseMany people from the ‘Vote Leave’ camp were motivated by the threat of migrant workers taking away jobs from locals, driving down wages by 10% and contributing to higher unemployment rates. Many voters expected that the reduction of immigrant workers would create more jobs for locals and lead to higher wages. But the government speculates that wages will increase by 0.2% to 0.6% and that wage stagnation will occur following the UK’s exit from the EU.
Jobs will be affected as business overheads rise following the fallout from EuropePart of the reason why electricity costs have remained flat or decrease is due to the uptake in energy-efficient technology. Businesses that have upgraded to commercial LED lights have reduced their energy consumption by up to 60%, which is giving them more capital to reinvest in labour. Businesses that previously had electrical bills in excess of £1 million a year are releasing up to £600,000, which can potentially create 30 jobs.
Taxes predicted to rise, despite ‘Vote Leaves’ expectation for tax cutsChancellor George Osborne warned that a vote to leave the EU could trigger tax hikes of 2 pence per pound at the current rate of 20p per pound or increase of 3 pence for the tax rate at 40 pence per pound. Additionally, Inheritance tax might also rise from 40 pence to 45 pence per pound. He said that a Vote for Leave would create a £30 billion black hole and would force the government to make budget cuts to public funding for organisations like the NHS.Should taxes increase, consumer spending will be reduced and businesses will need to absorb costs. Without an alternative economic plan, the threat of tax hikes will contribute to several thousand job losses once Article 54 is executed and the UK proceed to leave the UK.
Brexit’s impact on foreign tradeSince the United Kingdom’s referendum to leave the European Union, the value of the pound has dropped to its lowest level since (year). Despite the ‘Yes voters’ securing the UK’s path out of Europe, the country is starting to suffer economically from the decision to leave. Nigel Farage’s loose promise of securing £300 million from Brussels was correct, however the indirect costs to the economy have already outweighed the long-term cost savings that the people from the Yes party were expecting.
Businesses that rely on foreign imports have seen their costs skyrocket to at least 11% following the fall of the pound. To put things in perspective, businesses that paid £200,000 in foreign imports will now have to fork out an extra £22,000, which will cost the business one full-time employee. For businesses whose foreign imports are in the millions, this costs the economy tens or hundreds of jobs.
Can things get better?
It sounds like doom and gloom for the UK. Brexit sent shockwaves throughout the UK and abroad and despite the sense of optimism that people want to portray, there is likely to be a small calm before the storm and the sunshine on the other side.
By Tremaine Fernandez, Sales Manager at Save Wise