Actual economic effects cont...

[ManonLescaut]

Telegraph: Britain could be up to 70 billion worse off if it leaves the single market IFS warns

The respected economic think tank said that Britain could enjoy an extra 4 per cent in national income if it remains in the single market, equivalent to two years worth of growth.

The report claims that while leaving the EU will free the UK from an estimated £8 billion a year of budget contributions, the loss of trade from Brexit could hit tax receipts by a larger amount.

It found new trade deals would be unlikely to make up for lost EU trade, which accounts for 44 per cent of British exports and 39 per cent of service exports.

Telegraph: Treasury looks at quitting the single market

Officials say the talks have revealed a willingness among some top figures to scrap passporting despite early calls to stay in the single market from some quarters...

Mr Boleat cast doubt over the UK’s ability to secure a Norway-style deal to remain in the single market. He said accepting free movement of people and paying large sums to Brussels while accepting its rules would not be politically acceptable.

The BBA wants the UK to leave the single market but retain unimpeded access to EU markets.

[Peregrina]

John Redwood says the IFS is Wrong. But note how little he says on the detail of why they are wrong.

[GloriaGaynor]

I find the fact that leaving the single market is even being considered alarming. How can we be sure that economics will trump ideology?

What price is worth paying to stop EU migrants in Brexiteers' book?

[Tryingtosaveup]

Gloria, any price!

[Globetrotter100]

money.cnn.com/2016/07/08/investing/pound-worst-currency-brexit/index.html

It's a few days old now, but data remains the same.

[GloriaGaynor]

MOD facing extra £700 million costs post-Brexit

Due to the fall in Sterling.

[GhostofFrankGrimes]

www.independent.co.uk/news/uk/theres-a-huge-sign-of-a-looming-brexit-jobs-disaster-a7185686.html

Almost all major investment banks and economic think tanks have said that Britain is now heading for some sort of recession in the wake of the Brexit vote.

[LumpySpacedPrincess]

Surely the only recession that has been voted for.

[GhostofFrankGrimes]

Not related to Brexit but leaving the EU surely won't help moving forward. Also makes a mockery of all those photo shoots of Osborne in hi vis jackets. Austerity was a crock and now Hammond is going to throw money around like confetti filling the EU subsidy black hole.

www.theguardian.com/business/2016/aug/12/uk-construction-sector-slips-into-recession-for-first-time-in-four-years

[GloriaGaynor]

UK space sector fears Brexit will hinder EU contracts

[HPFA]

Sadly, it's behind the paywall but there's a fantastic article by Rachel Sylvester in today's Times setting out the cost to the government of Brexit negotiations. Last sentence:

"At the centre of this web of conflicting....interests sits Sir Jeremy Heywood, the cabinet secretary. As the Brexit bureaucracy grows, there is only one person taking back control"

Worth £1.40 for that sentence alone!

[GrandadGrumps]

//www.reddit.com/r/ukpolitics/comments/4xwt83/brexit_bureaucracy_will_infuriate_out_voters/

[ManonLescaut]

Guardian: Brexit damage to UK economy will outweigh wage gains

"A report by the Resolution Foundation thinktank said there would be a small pay increase to native-born employees in sectors such as security and cleaning if there was a big cut in the number of workers arriving in Britain from overseas.

But it estimated that these benefits would fail to compensate for the reduction in real incomes caused in the short term by the higher inflation triggered by a falling pound, and in the long term by a slowdown in the economy’s growth rate."

[ManonLescaut]

"While concluding that reducing net migration would have little impact on the earnings and employment prospects of British workers overall, the thinktank said a dramatic reduction in the numbers coming to Britain to work could cause “severe damage” to industries such as food and clothing manufacturing and domestic personnel, where more than 30% of the workforce are migrants."

[TheElementsSong]

www.bbc.co.uk/news/business-37107945

"Bureaux de change offering €0.99 for £1"

[smallfox2002]

Unemployment down today. That's good news!

[Maursh]

U.K. retail sales surged 1.4 percent in the month after the Brexit vote, (0.01% forecast). GBP surged off the back of this release today:
bloomberg interview here

[TheElementsSong]

Well, that does sound like good news!

[ManonLescaut]

Sort of.

Consumer and businesses have reacted in different ways because the former aren't so directly affected for the moment. Half the consumers in this country have no idea that anything untoward is on the horizon. They won't change their behaviour until their pay/job/prices/public services etc are affected...

[ManonLescaut]

Back at the ranch, the city seem to be giving up hope of unfettered single market access and the Norway model - given the EU regulations & contributions. Instead they seem to be hoping for a Switzerland plus deal...

FT: UK financial sector targets Swiss-style deal for EU market access

"There needs to be a bilateral deal providing as full two-way market access as possible,” said Anthony Browne, chief executive of the BBA, who has been part of Ms Vadera’s task force. “Both sides have an interest in making this work, as it is not in the interests of the other EU countries to be cut off from their main financial centre, especially at a time they are all seeking to boost economic growth.”

"Mr Browne cited Switzerland’s trade deals with the EU that give some sectors, such as insurance, full two-way access to the single market via a so-called passporting deal in return for keeping its regulation at an equivalent level to that in the bloc.

"Swiss banks do not benefit from any such trade deal...

"But the City... will argue that because the UK is the biggest export market for the rest of the EU it should be able to negotiate a beefed-up version of Switzerland’s arrangement."

Is that the same Switzerland that accepts FOM in return for single market access and is signed up to Schengen? The one that has been sanctioned for its attempt to limit FOM following it's own referendum - including Horizon and Erasmus?

[larrygrylls]

Manon,

You have dramatically changed your tune re consumers! Before they thought the sky was falling in and stopped spending but now they are too stupid to realise that Brexit is on the horizon.

The economy has hardly been affected yet. Of course we have not 'Brexited'...whatever that means.

We are enjoying our bread and circuses (the Olympics) and that is feeding positive consumer sentiment, as is the nice weather.

And meanwhile, Brexit is being pushed further into the future. Let's see what happens after the French and German elections....

[Mistigri]

Brexit hasn't happened, so as things stand, nothing has changed for your average consumer. If the people I have talked to recently are anything to go by, many think that it either won't happen, or it will happen at some undetermined point of time in the far distant future.

[ManonLescaut]

I don't recall what I said about consumers Larry, perhaps you could link.

Whatever I said would have been predicated on Brexit itself, not referendum no-mans-land.

And as I said above, Brexit effect, or rather referendum effect has hit businesses before consumers. Consumers won't change their behaviour until they're directly affected.

'Half the consumers' ie Leave voters, are unaware of likely economic consequences of Brexit whatever the final form. One only has to look at this forum for evidence of that.

[RBeer]

From the FT
The sharp costs of Brexit will be felt soon enough

With apologies for asking the question yet again, what will the economic effects of the UK leaving the EU be? In the past fortnight, Brexit supporters have started to claim their optimism is being justified by a buoyant stock market and strong figures for jobs and shop sales.
If Britain in August participated in anything resembling political debate, “What was all the fuss about?” would probably have been the prevailing argument. The only honest answer to the question of Brexit’s effects is “Don’t know”, at least with any precision.


But the strongest clue has not come from the stock market or July’s unemployment and retail sales but from the currency markets. There, the message has been consistent and its implications have still to sink in.
On June 23, the day of the referendum, sterling reached a high of $1.50 and €1.31 shortly after polls closed. It then plummeted, and has since averaged at about $1.30 and €1.18. In trade-weighted terms, the pound is down more than 15 per cent from its level a year ago, when David Cameron, then prime minister, started the renegotiations that would lead to the referendum.
The foreign exchange markets are not always a reliable witness. They can be skittish, and their daily movements are sometimes impenetrable. But when rates move sharply and then settle for more than a month without second thoughts, their judgment shouldn’t be ignored. It is backed not by punditry but by many billions of dollars from in and outside the UK, so deserves more attention than it has been getting.
In essence, the currency markets are saying that all UK assets are worth less than they used to be. Land, property, companies, bank deposits, government debt — everything in the UK has been marked down against the rest of the world. Although the FTSE 100 has boomed, that is largely because its component companies earn most of their revenue and profits outside the UK.
Why do these international valuations matter to the average British household? Not many people are old enough to remember Harold Wilson’s fallacious message to the electorate when his government devalued sterling in 1967. “The pound in your pocket”, he claimed reassuringly, would not be devalued. Of course it was, and it has been again in the past two months, as every British holiday-maker abroad has already discovered.
But nobody should imagine that the traveller’s experience is an isolated exception. Indirectly, all Britons go abroad every day — to buy oil, food, clothes, Hollywood movies and much more. Imports are equal to roughly 30 per cent of UK gross domestic product, and if their cost goes up because of Brexit, it is only a matter of time before everybody will be poorer because of Brexit.
The mechanism by which Britons will get poorer is through prices rising more than wages — in other words, a real-wage cut. That would cement the effects of a cheaper pound, and in a textbook world, sterling’s real devaluation would then make exports more competitive, so their volume would blossom while that of imports shrunk. In which case, Britain’s large trade deficit would fall; the economy would start to be rebalanced; in due course foreigners would be so impressed that they would again favour the pound, and its international purchasing power would gradually be restored.
The Big Read


Can the UK craft new policies to keep its lead in research and development?
The snag with this happy prognosis is that it hasn’t happened before, at least not on a lasting basis. Seventy years ago the pound could buy $4.03, and it has been devalued periodically since then. Each devaluation produced a temporary fall in the real exchange rate, but it was not long before domestic costs started rising faster than the costs of Britain’s trading partners, and the advantage eroded.
Will this time be different? There is no reason to think so. In fact, a devaluation-powered improvement in Britain’s trade will be even harder to achieve if Brexit is reducing access to the EU’s single market and no alternative export markets have opened up to make good the difference. In which case, the message from the foreign exchanges is bleak. The British have become poorer than they were before the votes were counted on June 23, and that reality will become clearer as the months go by. Just when real incomes had started to recover from the sharp squeeze of 2009-14, they will be set back again.
The holidaymakers returning from abroad have already tasted what is to come. Whether getting poorer is what 52 per cent of the June 23 voters wanted or expected, it is what is happening.

The writer is a former deputy governor of the Bank of England and is chairman at Royal London

[smallfox2002]

Excellent analysis of the situation there.

[ManonLescaut]

Thanks for posting the FT article, I'd missed it.