In 2016, British voters surprised the world as citizens of England and Wales expressed their nationalistic desire to exit the European Union. The Brexit referendum signaled a narrow victory for the “Leave” camp, particularly since it did not actually reflect the desire of the United Kingdom.
The “English, not British” sentiment refers to what people who live in the Kingdom of England and Wales, but not necessarily in London, have been feeling since 2006. A longitudinal opinion poll conducted by respected market research firm ICM from 2005 to 2006 indicated that 16 percent of UK voters felt English and not British; this sentiment is congruent with the Brexit referendum 10 years later.
Scotland and Northern Ireland voted to remain in the EU, and it remains to be seen how the political sentiment of these two jurisdictions will determine not only the future of this country but also Brexit’s impact to the global economy.
Financial Anarchy in the UK?
The immediate economic impact of Brexit is gradually being felt in households across the UK. The national currency, which was once considered to be the world’s strongest, has plummeted to its lowest levels since the start of the global financial crisis in 2008. The household savings rate is at 3.3 percent in 2017; this is a historical low level, and the prospect of rising interest rates has many British consumers worried.
A report published by ABC Money UK in June 2017 indicated that sales of safe boxes across the British Isles have been pretty active throughout the year, which reflects a distrust in financial institutions. Investing in gold is another strategy being adopted by UK residents who are concerned about a coming financial storm.
When the Fear Turns Global
The worst fears of the British people are related to trade, and they yet to materialize since the UK has not formally exited the EU. Losing access to the single market will be a major economic shift for both the UK and the EU, but British people stand to lose the most.
The global influence that the UK has historically enjoyed is becoming eroded. Lord Hague, the Foreign Secretary who preceded the controversial Boris Johnson, has warned that the EU will likely grow more influential as the UK becomes less significant, particularly if Scotland and Northern Ireland seek ways to access the EU single market on their own.
British-American Trade Relations
Both the UK and the United States are losing respective global influence. What this means for the global economy is that international trade agreements will have to be rewritten, and they will likely not be favorable to these two former economic powers. A recent study by Cambridge University suggests that Brexit will cause a slight uptick of the American unemployment rate as British companies reduce their investment levels in the U.S.
British and American trade will be subject to uncertainty over the next few years; this will likely cause economic instability in these two countries, but the global domino effect will not be as pronounced as many people fear. In other regions of the world, national economies are exploring new trade agreements; for example, Central America is negotiating with the Caribbean and Australia is doing the same with South Asia.
In the end, the initial impact of Brexit on the global economy will probably wear off in about two decades.