Impact of Brexit on Global Economy: Opportunities and Challenges

2016-07-07 | Future Market Insights | Electronics, Semiconductors, and ICT

June 23 marked a historic referendum wherein the people of Britain voted for a British exit from the EU, i.e. Brexit. For some people, Brexit sounded similar to Grexit that happened in 2015. Both are conceptually different from each other; while the latter was solely due to financial crises, immigration was seen to be a major reason for the former. The Brexit referendum was conducted in order to determine whether or not the British people want to stay with the EU.

The revolutionary event of Brexit has added uncertainty to the already volatile global economy. It has sent shockwaves to the British and EU economy, and beyond that the global economy. The very first sign observed was a tremendous drop in the value of the pound, ever since 1985. Now that it has really happened, it’s imperative that we learn how it’s going to affect the British and the rest of the world’s economy, now as well as later in the near future.

Defining the immediate impact

This seismic event has started posing its immediate impact through financial markets. However, economic shifts in the existing situation are predicted to happen gradually unlike the financial ones. Businesses, which operate in the Britain and export most of their products to Europe will experience no major change because shipping will happen without a hint of a tariff. Considering the other way round; European banks, which have a vast pool of employees working in the Britain will also see no considerable economic changes because their employees can continue working based on the same passports.

The deeper we dig in the Brexit effects, the better we anticipate the impact. The most prominent example here is the tremendous drop in the British pound against the dollar. Such a drastic currency shift would unfortunately bring in the worst of inflation to the British market because of increased pricing of imported goods. Moreover, the Brexit is anticipated to increase the competition among the nation’s export industries as well. Coming to the stock market, the next day after the Brexit was announced, the stock market was observed to significantly cease. As a result, investors are currently not keen to invest in the stock market, consequent to the seismic event.

Anticipating the impact in the near future

As the months will pass after the Brexit, the financial impact would seemingly lessen, triggering the real economic disruptions. British-owned businesses or international businesses headquartered somewhere in the Britain might face great trouble in the near future.

The next segment should naturally comprise of the Brexit impact on global economy in the long run. Major economic forces will certainly prevail in the future but this would be too early to define the exact effect of Brexit on global economy, in the long run. The choices that British leaders would make will be crucial in predicting the impact on each facet of the economy.