U.K. Economy Showing Brexit Effects
LONDON—The evidence is piling up — Britain’s decision to leave the European Union is already hitting the economy.
Following the initial market jolts that have, among other things, seen the pound slide to 31-year lows against the dollar, the wider economy appears to be feeling the shockwaves from the vote to leave the 28-country bloc.
On Friday, market research firm GfK found that consumer confidence took a dive in the wake of the June 23 decision to leave the EU. In a one-off survey to gauge the impact of the referendum result, it said its core index of consumer confidence dropped by 8 points to minus 9 in July, its lowest level since December 2013.
The decline, which was the sharpest in 21 years, is important as consumer confidence is fundamental for household spending, a key ingredient of the British economy.
GfK found that all of the key measures used to calculate the index, including perceptions of individuals’ financial situation or their propensity to make purchases, have fallen.
“During this period of uncertainty, we’ve seen a very significant drop in confidence, as is clear from the fact that every one of our key measures has fallen, with the biggest decrease occurring in the outlook for the general economic situation in the next 12 months,” Joe Staton, head of market dynamics at GfK said.
The online survey of 2,002 respondents, which was conducted between June 30 and July 5, shows that sentiment has sunk among both those who voted to remain in the EU and those who voted to leave. The measure for so-called “remainers” was minus 13, while “leavers” were slightly more optimistic at minus 5. The referendum saw 52 per cent voting to leave the EU.
The survey backs the view from Bank of England Governor Mark Carney that the negative economic effects he warned about in the run-up to the referendum are “crystallizing.”