UK: Economic implications of Brexit – Wells Fargo

Research Team at Wells Fargo, suggests that the UK economy seems likely to experience most of the direct effects of the Brexit and the biggest fallout likely will be on investment spending in the UK.

Key Quotes

“The UK currently enjoys free movement of goods, services and people with the other 27 member countries of the EU (EU-27) under the terms of the Single Market. Although this free movement will not go away overnight, the UK will need to renegotiate the terms under which trade with the EU-27 will be conducted going forward. Whether or not this trade will continue under duty-free terms will be a matter of negotiation. However, the uncertainty surrounding the outcome of these complex negotiations likely will weigh on investment spending in the UK.

Growth in capital spending has already weakened, and a drop into negative territory in coming quarters seems likely. Will the 2 million individuals of EU-27 origin who currently live in the UK want to buy homes now that their legal status to remain in the UK is questionable? Will the City of London remain the financial capital of Europe if the UK is no longer under the EU regulatory umbrella?

The direct effects of Brexit on the rest of the world should be manageable. The UK economy accounts for only 4 percent of global GDP and most other countries do not have massive financial exposure to British assets. However, the indirect effects of Brexit on the rest of the world could be large.”