Brexit

[admin]

Foreign companies play a pivotal role in Britain’s unusually open economy, carrying out half of all research-and-development spending as well as raising productivity and wages in the firms they snap up (see article). Yet, despite the good news about ARM, two clouds hang over Britain’s ability to attract foreign direct investment. The new government appears to have a more interventionist approach to the economy, one that may put the brakes on similar deals in the future. And Brexit may eventually mean that there are fewer British firms worth bidding for in the first place.

Open for business? | The Economist

Britain’s divorce from the European Union is not going to be easy given there is no precedent and no planning was done before the historic referendum result. A bit more than one month on, here’s what we know -- and what we still have to find out -- about the key issues facing investors and executives as officials work out exactly what Brexit will mean.

The Beginners’ Guide to Brexit: What Have We Learned So Far? - Bloomberg

One benefit of Brexit is that it allows the economy to be rebooted. That is true after any severe economic shock, which certainly applies to the decision to leave the EU. The last time UK policymakers had the chance to implement root and branch cures to the economy’s structural weaknesses was during the financial and economic crisis of 2008-09. Instead they bottled it, relying almost wholly on the Bank of England to support activity through interest rate cuts and the money-creation programme known as quantitative easing (QE).

Brexit offers key opportunity to reboot UK economy | Business | The Guardian

The CBI reported today that manufacturers’ business confidence has fallen at its fastest rate since early 2009, causing falls in investment and hiring plans. This corroborates surveys by Deloitte, Markit (pdf), the Institute of Directors and, to a lesser extent the Bank of England* all of which suggest that the Brexit vote will depress economic activity. This shouldn’t be surprising: uncertainty is bad for the economy. What worries me is that the pain of this will disproportionately hit the low-paid. A new paper (pdf) from the Minneapolis Fed says: It is precisely the households at the bottom of the wealth distribution with low savings rates and high propensities to consume out of current income that suffer the largest welfare losses from a severe recession. Further, these losses are much more severe than those sustained by the "average" household. This is because the low-paid have no financial assets to cushion themselves against job loss and so must suffer either big falls in living standards or resort to high-cost payday lenders whereas the rich have savings and/or access to cheaper credit

Stumbling and Mumbling: Brexit: a blow to the low-paid?