Great Britain: The Brexit Brief

By Niti Parekh

On March 29, 2019, the United Kingdom is set to “divorce” the European Union, after being a member for 45 years and a crucial trade player through its membership. According to several financial experts, social psychologists, and institutional investors, it is certain that the English economy will come under siege, with probable aftershocks in the following years, but the extent of the damage and the specific industries it would affect are still unknown.

London used to be the swap clearing capital of Europe.  According to Dirk Nitzsche, a senior lecturer in Finance at Cass Business School London and an affiliate of 18 years of New York University, the center of swap clearing is moving to Frankfurt. He also commented that the economy may see major job losses in and around London, with anywhere between 5,000 to 80,000 people looking at unemployment. This will affect tax revenue for the government, and reduce investment in education, healthcare, and affordable housing. Many suggest looking to financial innovation and entrepreneurship for more job creation to offset the anticipated job losses.

Macro variables such as manufacturing, foreign direct investments,  and the housing market are also forecasted to follow a negative trajectory. Manufacturing will become more expensive, and economic specialists expect factories in and around London to shut down or reduce production, especially car manufacturers. Financial analysts have confirmed hearing sound bytes from Airbus, Jaguar, and Nissan on reconsidering their investments in the UK.

Once known as a stable investment, the housing market in the UK has also slowed down. One Emerging Markets investment advisor commented that it has become common practice to reevaluate current investments in the UK Stock Market and Real Estate due to this uncertainty.

Says Dr. Nitzsche about jobs in the UK after Brexit, “One cannot be sure, but I can say that chances are that the job markets may be more of a problem for Europeans who are currently working without visa or work permits. For Americans, I definitely do not think it will worsen, it might improve, but we cannot be sure. As for current NYU students, studying in the UK for their semester abroad would be an economical stance, as the foreign exchange is expected to hugely drop due to negative sentiments of market traders post Brexit.”

The next five months are critical. The EU and UK will decide on the final deal (if it comes to fruition). They will also assess the effects of the deal on Ireland, which is still a part of the European Union but does not share a border with the UK. Despite this inconclusivity, the general consensus is that there will be permanent damage done to the British economy, and London as a financial center, affecting Brits and broader Europeans alike.