Brexit causes dramatic drop in UK economy - Politics Forum.org | PoFo

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#14704144
The Brexiteers have already admitted their most obvious lies. As time goes on, their other claims will all be exposed as lies. Brexiteers have described expert advice on the negative effects of Brexit as "project fear." And Boris Johnson has promised that he'll apologize if there are any negative effects.

- the pound is tumbling
- UK credit rating has been cut
- real estate is in the cellar and most funds have stopped trading
- stock exchange is in turmoil
- business confidence is down and politics is in shambles
- the economy is going into recession

And this is just for starters. The real fun will start when article 50 is triggered and negotiations will drag on for years. Day in day out, we are going to have negative headlines. By the time we are done, the Lehman moment will look like a birthday party.

Brexit causes dramatic drop in UK economy, data suggests

Britain's decision to leave the EU has led to a "dramatic deterioration" in economic activity, not seen since the aftermath of the financial crisis.

Data from IHS Markit's Purchasing Manager's Index, or PMI, shows a fall to 47.7 in July, the lowest level since April in 2009. A reading below 50 indicates contraction.
Both manufacturing and service sectors saw a decline in output and orders. However, exports picked up, driven by the weakening of the pound.

The report surveyed more than 650 services companies, from sectors including transport, business services, computing and restaurants. It asked them: "Is the level of business activity at your company higher, the same or lower than one month ago?" For manufacturers, it asked whether production had gone up or down.

The PMI is the first significant set of data measuring business reaction to the result of the UK referendum. Chris Williamson, chief economist at IHS Markit, said the downturn has been "most commonly attributed in one way or another to 'Brexit'."

Service companies, such as insurance or advertising, are feeling rather less positive
"Given the record slump in service sector business expectations, the suggestion is that there is further pain to come in the short-term at least."

Mr Williamson added that the economy could contract by 0.4% in the third quarter of this year, but that would depend on whether the current slump continued.

"The only other times we have seen this index fall to these low levels, was the global financial crisis in 2008/9, the bursting of the dot com bubble, and the 1998 Asian financial crisis," he told the BBC.

"The difference this time is that it is entirely home-grown, which suggest the impact could be greater on the UK economy than before."

"This is exactly what most economists were saying would happen."

The figures in PMI surveys are taken seriously by economists as early warning signs of what is in the pipeline. When there is a downturn, the PMIs generally tell the same story.

So this is a troubling set of results. But it is just one month's worth. It is possible that this is a "shock-induced nadir", as the chief economist at the firm who conducted the survey put it, and that the economy will right itself in the coming months.

In addition, the financial markets have stabilised and in some areas rebounded, in an adjustment after the vote that was described by the IMF as severe but generally orderly.
That said, the survey results do increase the chances of some action from the Bank of England, perhaps an interest rate cut in August, or perhaps even some additional spending plans in the chancellor's Autumn Statement.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the figures provided the "first major evidence that the UK is entering a sharp downturn".
Although he added that the "confidence shock from the Leave vote might wear off over the coming months".

Media captionPhilip Hammond willing to "reset fiscal policy" if deemed necessary
Neil Wilson, markets analyst at ETX Capital, said he thought the UK was "heading for a recession again", and that the data would almost certainly prompt the Bank of England to roll out further stimulus.

"Let's be clear, the PMI data is a measure of sentiment, it's not a measure of any hard activity in the economy. "What it tells us is businesses confidence has been dented, they're not sure, they're in a period of uncertainty now." Earlier on Friday, Mr Hammond said that he might "reset" Britain's fiscal policy.

While IHS Markit's reading on the UK economy was worse than most analysts expected, its verdict on the wider eurozone economy was more cheery.

Although business confidence dropped to an 18-month low, the overall pace of economic growth was in line with pre-Brexit trends, and employment across the eurozone rose.
The optimistic outlook is in line with comments by made by the president of the European Central Bank (ECB), Mario Draghi, who said on Thursday that Europe's financial markets had "weathered" the uncertainty caused by the vote.

Europe Economics' Andrew Lilico, who argued during the referendum campaign that leaving the EU would be beneficial for the UK in the long term, told the BBC the PMI data was "no surprise", and that it "doesn't tell us much about what Brexit's longer term impact will be".

Mr Lilico said he always expected a short term reaction, and those who voted to leave, "expected a short term slowdown too". The downturn, he added, was "associated with risks in the global economy," as well as Brexit.
#14704215
I think there is an over exaggeration on the interpretation of the figures. There is a slow-down as people and investors are waiting but they are not leaving and we are not seeing panic or bank runs. It's a tide that can easily turn with some government reassurance statements.
#14704234
Reduced activity provides insufficient information, and changes in volume will always be cyclic. If there is a corresponding and proportional increase in the EU then we could draw a speculative opinion. This is just one month's update from the UK in mid-summer, and the next month could go either way.

Economic integration is very important and an economic dip from Brexit was anticipated, but the referendum was not about economic integration. The UK has always been was torn between integration within Europe and integration within the Commonwealth. We are now looking at possibly more global integration, and technological changes have made that more practical than it was in the 1950s.

Australia, Canada have put closer UK integration back on the cards and nobody is in a position to write-off the UK at this stage.
#14704236
Glen wrote:Australia, Canada have put closer UK integration back on the cards and nobody is in a position to write-off the UK at this stage.


Indeed, at the end of the day the UK has some of the healthiest and most stable companies in the world and solid technological progress.
#14704244
Glen wrote:Economic integration is very important and an economic dip from Brexit was anticipated, but the referendum was not about economic integration.


Being inside or outside the common market is all about economic integration or the disruption of that integration.

The UK has always been was torn between integration within Europe and integration within the Commonwealth.


There has never been any opposition between integrating into the common market and trading outside the common market. The EU even has a number of trade deals with Commonwealth countries, most of which wanted the UK to stay inside the EU.

We are now looking at possibly more global integration, and technological changes have made that more practical than it was in the 1950s.


Integration in the common market and tying trade deals with other countries are two very different things. The common market is moving towards an internal market, where you can trade across Europe almost like you would trade inside your domestic market. No trade deal will ever give you that degree of integration.

People in the UK have always taken the common market for granted, completely ignoring the fact that the degree of political cooperation necessary to arrive at this degree of economic integration has never been reached elsewhere and is highly unlikely to be duplicated anywhere else.
#14704267
Fundamentally, UK FTAs are more generous than EU FTAs. History shows the UK typically opts for tariff free trade with no strings attached.

EU trade deals are protective of their internal market and this makes EU trade non-sustainable. For example, by generously protecting its own intellectual property such as patents, the EU increases the costs of manufacturing medicines because it effectively outlaws the lower cost generic versions that developing countries rely on. This actively undermines healthcare and diverts funding away from sustainable development programmes. Less investment means fewer returns, and retaining the status quo means we all die on a barren overstretched planet. UK trade deals are likely to focus on removing tariff barriers without increasing costs in other areas, which is preferable for all concerned.

One fundamental problem that affects us all is that global sustainability policies are among the first to be compromised when the EU and USA draw up their trade agreements. The UK will present a different way forward. The problem is that the UK is too small to change the world by itself, and Brexit is not about saving the world. Any sustainable future needs emerging economies such as India and Nigeria to help navigate the way forward. The EU has had its chance and failed, which is why I am hopeful that the Commonwealth pulls together and steers a new path.

Any change in the UK will be painful in the short term, but following the path set by the EU is simply immoral, a detriment to the health of the planet, and who cares about currency values at the close of today if there is no tomorrow?
#14704296
While it can be said that British history shows that the UK can and at least or could get whatever it wanted in global affairs and trade agreements due to it being one of the most powerful empires back in the day and it still punches well above its weight today, if you are thinking about preferable immigration conditions, you will notice that all those of us who studied modern economics understand that free-trade by default includes free market of people as well, it is well within its definition and the British have understood that a long time now and that is why they extended the right of the commonwealth people to come to the UK and even today they form the majority of non-ethnic-British people in the UK.
#14704298
I call B$ on any company, particularly American one's that have an interest in shifting the markets in currencies et'c , this 'BREXIT' example is no different.
Whether it's 'Standard & Poor', J.P Morgan or any U.K company for that matter, with their so-called 'experts, they have their own self-interest as the motivation to talk down the UK economy.

The 'Taxpayers Alliance', The Institute for Fiscal Studies', are another two such example, with the sole objective of reducing taxes on the rich & better-off.

An economy the size of the UK doesn't take a dive in a matter of weeks without some tangible influence other than 'BREXIT'.

A country's economy has a complete mix of companies or individuals as consumers being it's driving force, unless prices are being jacked up for no reason at all, the economy is unlikely to have a collective 'heart-attack' due to BREXIT.

'Talk' is 'talk', ignore it, carry on as we normally do & these shell-heads talking the economy will 'hopefully' get their fingers burnt.

What should raise peoples heads, as well as make them very angry though, is Theresa MAY's appointment of Phillip HAMMOND as Chancellor.
He is wanting to 'RESET' the fiscal clock for 'balancing-the books', an objective that has NEVER been achieved since taxation began or with the creation of the Bank of England, an institution set up by William the Third, solely to 'CREATE 'DEBT'.

With the NATIONAL DEBT 'TRIPLING' in size since 2010,how long before the 'FISCAL' deficit follows suit?

Remember, the TORIES made the 'working class', the pensioners, the disabled, as well as the unemployed, pay the price of that fiscal reduction that gave a little more to those in work, in other words, the TORIES robbed these groups, then handed some of the money as tax reductions for the 'rich' & 'better-off'.

Again, the £375 BILLION of Quantitative Easing(Q.E), plus the £35 BILLION from the sale of parts of HSBC, have already been blown on DEFENCE requisitions such as TWO aircraft carriers & the TRIDENT submarine replacements.


Those four Trident subs, have been paid for out of QE(borrowed money),as have the two carriers.

There's also the issue of 'Foreign Aid', some £12 BILLION per annum, for which the poorer people of this country are those are paying for it, in addition higher prices(inflation),whereas the rich\better-off pay NOTHING, how can they be, they are getting their taxes CUT, so they cannot be paying more, despite government 'assertions' to the contrary.

This 'TORY' government will lose the next election, DESPITE their gerrymandering of the constituency boundaries, because the country KNOW THAT THEY HAVE FAILED ON THE ONE 'STRENGTH' THAT GOT THEM ELECTED IN THE FIRST PLACE- 'ECONOMIC COMPETENCE'...DON'T MAKE ME LAUGH,LOL.

The electorate will be forced by these boundary changes to go for the 'nuclear' option in selecting the next government, they will let 'LABOUR' in, because the TORIES used the economic weapon in a government's arsenal to ROB-THE-POOR to cut the fiscal deficit, which has been abandoned, yet those affected are not going to be compensated, such as the pensioners, whom a 'TORY' government depend upon for their 'power'.

'Economies' do not bounce up & down because some set of lying doomsayers say it will\is.

The economy will always 'move', because that is in their nature, every transaction, is making markets move, the only effect that 'government' has on economies, is SLOWING THEM DOWN & MAKING THE INFLATION THAT SLOWS THEM DOWN.
#14704332
noemon wrote:While it can be said that British history shows that the UK can and at least or could get whatever it wanted in global affairs and trade agreements due to it being one of the most powerful empires back in the day and it still punches well above its weight today, if you are thinking about preferable immigration conditions, you will notice that all those of us who studied modern economics understand that free-trade by default includes free market of people as well, it is well within its definition and the British have understood that a long time now and that is why they extended the right of the commonwealth people to come to the UK and even today they form the majority of non-ethnic-British people in the UK.


The UK has always been keen to promote immigration and has long maintained equitable points-based immigration policies, which it maintained independently of FTAs. There has historically been no need to overlap the two issues because movement was very free under the points-based models. On principle, I don't think immigration is an FTA issue.

EU policies are not equitable, and the EU makes no effort to avoid being fined by WTO for breaching international laws. If a Nigerian entering the UK must follow the points-based system, but a Austrian entering the UK can skip that process, then the situation is unfair and immoral, or in other words not-British. The pressure caused by adhering to EU policies has provoked immigration debates in parliament, and caused the points-based system to worsen, such that relatives of non-EU immigrants are now being denied entry when they previously would have moved freely.

The EU's many protectionist policies prompted Brexit, and the topic that received most traction was immigration. This has created a new divisive problem on the topic that did not exist pre-EU, and its unclear how the UK will resolve the issue moving forward. Prospective trading partners are seeking free movement as part of new UK FTAs, and free movement is something that I would prefer to see resolved outside of FTAs because I would prefer an elegant equitable blanket policy that everyone understands. Its a real concern.
Last edited by Glen on 22 Jul 2016 21:01, edited 5 times in total.
#14704334
noemon wrote:While it can be said that British history shows that the UK can and at least or could get whatever it wanted in global affairs and trade agreements due to it being one of the most powerful empires back in the day and it still punches well above its weight today, if you are thinking about preferable immigration conditions, you will notice that all those of us who studied modern economics understand that free-trade by default includes free market of people as well, it is well within its definition and the British have understood that a long time now and that is why they extended the right of the commonwealth people to come to the UK and even today they form the majority of non-ethnic-British people in the UK.


It's worth mentioning that there was a preamble to the Treaties of Rome 1957, that there would 'eventually, be a 'political union' arising from the creation of the EEC.

Peculiar to this country, is\was our 'attachment' to our former colonies, secondly, our refusal to join a 'customs' union that limited our right to set tariffs with third countries & lastly the refusal of this country's people at large to join a 'supra-national' state, with the consequent loss of sovereignty that it entailed.

Charles De Gaulle wanted a strong but small Europe(excluding Britain)as a 'buffer' between the USA & the Soviet Union.

Furthermore, De Gaulle had deep mistrust of this country's association with the USA, a mistrust well placed IMHO, as this TORY government once again dances to the American defence industries tune of increasing defence spending when the country is in the middle of a now abandoned 'DEFICT ELIMINATION' policy prescription that's FAILED.

It was 'SHENEGEN', followed by 'MAASTRICHT' then 'LISBON' Treaty's & amendments that created the immigration crisis for the referendum to take place.
The right of 'free movement' became more than that, the 'single-market' that is the territorial boundaries abolition that was integral to that with the treaty changes which created the EU, were changes that should never have included this country, as we were NOT part of SHENEGEN, so those 'amendments' should not have been signed up for in the first place.

This is the trouble with Europe, it's a 'political' project designed to create a supra-national state, the issues of 'free movement' of Capital, Goods & people should have been settled as individual components only.

The French are wrong to link BREXIT talks 'success' being dependent on 'free movement' being accepted, as we are NOT going to be in the EU & we never signed up to SHENEGEN in the first place.

The blame can also be laid at New Labour's door, because they are undemocratic, Gordon BROWN effectively denied that any 'real' changes were made to the Treaty of Rome, when he said that if there were, a referendum would be held.

This is what the Labour Party Manifesto said,
'We will put it - the EU Constitution - to the British people in a referendum and campaign whole-heartedly for a "Yes" vote'.

After BROWN took over from BLAIR, he reneged on the manifesto promise, he disingenuously broke that promise to the electorate by suggesting that it was a 'new' EU Constitution, when, in FACT it was a 'repackaging' of the existing Constitution, that gave away fundamental competences previously held by the UK government.

Rather than have the promised referendum, BROW merely 'informed' parliament of the 'changes' & they(as always)wanted to believe what they wanted to hear of course.

That's why 'Labour' are in their current mess, NOBODY 'TRUST' THEM, anymore than they do the TORIES.

Does this matter? of course NOT, NOT for us, the economy or Europe, because no one should ever take at face value what any politician says.
But Hey! we will survive & possibly 'thrive' outside.
If that happens, the EU will collapse, particularly now that the BRITS will NOT be funding French farmers & we BRITS WILL NOT TOLERATE THIS 'TORY' GOVERNMENT 'SUBSIDISING' OUR FARMERS, IN ORDER TO REVIVE A 1950's U.K.
#14704355
UK trade deals are likely to focus on removing tariff barriers without increasing costs in other areas, which is preferable for all concerned.

The EU's Everything But Arms policy allows LDCs to export to the EU without any quotas or tariffs. How will the UK reduce these below zero?
#14704357
Furthermore, De Gaulle had deep mistrust of this country's association with the USA, a mistrust well placed IMHO, as this TORY government once again dances to the American defence industries tune of increasing defence spending when the country is in the middle of a now abandoned 'DEFICT ELIMINATION' policy prescription that's FAILED.


Ofc he did as a former master of the world, he understood what the US next steps would be and that is to consolidate her power over the planet at the expense of everybody else.

There is a demarcation point here between the point you actually believe that you can challenge the global hegemony of whichever power is sitting at the throne, which De Gualle knew he could not and thus needed to create an EU and that is something that most serious Europeans have understood.

It was 'SHENEGEN', followed by 'MAASTRICHT' then 'LISBON' Treaty's & amendments that created the immigration crisis for the referendum to take place.
The right of 'free movement' became more than that, the 'single-market' that is the territorial boundaries abolition that was integral to that with the treaty changes which created the EU, were changes that should never have included this country, as we were NOT part of SHENEGEN, so those 'amendments' should not have been signed up for in the first place.
This is the trouble with Europe, it's a 'political' project designed to create a supra-national state, the issues of 'free movement' of Capital, Goods & people should have been settled as individual components only.
The French are wrong to link BREXIT talks 'success' being dependent on 'free movement' being accepted, as we are NOT going to be in the EU & we never signed up to SHENEGEN in the first place.


Schengen is passport free not movement free, the EU is movement free and there is a difference between the 2, passport free is largely inconsequential in the EU at normal mode, you still have to be European to travel and you still have to show documentation. Schengen though has become the fake rally cry of some people and that is on purpose because I am certain not even EU nationalists want to prevent other European people from coming into their countries, the problem is that people think that this enables muslims to travel around and they combine the 2, when that is not actually the case and that is the weirdest part of all. The problem begins when it is rationalised that some people(EU or otherwise) take advantage of you, and with such generous welfare in Northern Europe, it is very easy for certain people to use that against welfare because these people have targeted welfare as a concept and that is the ultimate fight, the immigrants taking some welfare is merely a national side-effect which is then shown to be impossible and it depends in some time-lines it most likely is. The question then one become one of priorities and R.O.I. and welfare has been a succesfull ROI at least in Britain, of course the British people cannot make sense of that because they have not got empirical experience of social mobility in other nations and how people despair(and thus vanish as productive units) when they find themselves in a precarious position, while the British have a cushion to keep their dignities and thus allow them to rebounce personally, professionally and essentially economically.

The reason the UK is not in Schengen is not because it did not want to be but because there is no point in being, Schengen only applies to land borders not islands, it has no effect on island-countries so it is redundant.
#14704365
AFAIK wrote:The EU's Everything But Arms policy allows LDCs to export to the EU without any quotas or tariffs. How will the UK reduce these below zero?

Medicine is a good example because LDCs rely on low-cost generic copies of common medicines such as antibiotics.

As I understand the situation, EU intellectual property laws increase cost of exported medicines because the laws make it illegal to sell cheap copies. The UK can match zero tariffs and export cheaper products such as generic unbranded medicines, or permit trading partners to manufacture their own generic unbranded copies of UK medicines.

The UK can do things that the EU has refused to do if the UK is not bound to all EU laws. The mere existence of an EU harms free trade by removing healthy competition between some of the world's most advanced nations. Capitalists encourage competition, while the notion of EU political union undermines competition.
Last edited by Glen on 22 Jul 2016 22:18, edited 2 times in total.
#14704368
Glen wrote:Fundamentally, UK FTAs are more generous than EU FTAs. History shows the UK typically opts for tariff free trade with no strings attached.


Meaning no tariffs for British goods and no trade for foreign goods. The Chinese still remember the unequal treaties signed with GB after the Opium war and the Germans still remember the "made in Germany" stamp the UK imposed to discriminate against German products. As so often, with the "made in Germany" label, things turned out differently than your people imagined. As to post empire trade, there isn't much of a precedent since the UK has been part of the European trading block for over 40 years.

Anyways, the problem isn't tariffs. You put tariffs on our goods, we put tariffs on your goods. It's basically a zero sum game, with the exception that each party chooses industries it particularly wants to protect.

The real problem are non-tariff barriers. Normal export/import proceedings are enough to put you at a disadvantage over competitors inside the common market. And there is a whole host of non-tariff barriers that can be selected at will to keep foreign goods out. The French are very experienced at this game.

Modern production chains are internationally integrated and cars produced in the UK use as much as 70% foreign components. There's a huge difference between using foreign goods with all the bureaucratic hassle involved and using domestic products or products from inside the common market. Especially small companies are going to suffer. UK manufacturers will find that, far from reducing red tape from Brussels as the Brexiteers have claimed, red tape will actually increase, because in addition to all the technical standards issued by Brussels, they will have to do all the paperwork for importing/exporting, and the like. That'll add time and money, your competitors don't need.
#14704370
noemon wrote:you will notice that all those of us who studied modern economics understand that free-trade by default includes free market of people as well


Wait what? I do not remember a single standard trade model where labor is a mobile factor.

I also cannot of think of a free trade area with free movement of people other than the EEA.
#14704372
Atlantis wrote:Germans still remember the "made in Germany" stamp the UK imposed to discriminate against German products. As so often, with the "made in Germany" label, things turned out differently than your people imagined.

I agree with most of your points, but can you please expand on this?

Image

Atlantis wrote:As to post empire trade, there isn't much of a precedent since the UK has been part of the European trading block for over 40 years.

23 years. Before 1992 the UK maintained its own FTAs in parts of Europe. The UK swapped to using the EEA in 1992.
#14704376
[quote="Glen"]Fundamentally, UK FTAs are more generous than EU FTAs. History shows the UK typically opts for tariff free trade with no strings attached.<br abp="757"><br abp="758">

That is quite true, this country, in fact, tried(too half-heartedly)to set up the EFTA with the Nordic countries, but, like the 'Commonwealth', is just a piece of it's imperial history or nostalgia, as opposed to making it work for 'real'.

It's telling, that so far, only Canada & Australia show real interest in post-BREXIT trade deals.

It remains to be seen how Sweden, Austria, Switzerland & Norway respond.

The thing about the EU is, at the end of the day, it's still just a trade club, with 'free movement' really meaning(apart from students\pensioners)it's just a device for the capitalist to obtain the cheapest labour by making it easier to get them to move around in search of work.
It's a different ball-game when it comes to moving capital fixed - intellectual assets around the EU, hence 'mobility of labour'.

When international companies make takeovers, they should be prohibited in taking those assets in any shape or form, away from the EU country in which they are located, that would make those takeover companies work for those countries\EU, but NOT for AMERICA,CHINA OR JAPAN & be liable for EU taxation.
#14704377
Glen wrote:As I understand the situation, EU intellectual property laws increase cost of exported medicines because the laws make it illegal to sell cheap copies.


You have understood wrongly. Patent protection is the same in the UK and the EU, in fact there are moves, long overdue, to create a single European patent. Patent protection is the only reason why you have a higher standard of living in the UK than in Bangladesh, for example. Once a patent expires, anybody is free to use it for producing generic products. A company in Bangladesh can make generic drugs at a fraction of the cost needed in the UK to produce the same drug. In other words, either you drop your earnings to that of Bangladesh or your industry goes bust. The only way to avoid this and have a higher standard of living than Bangladesh it by developing novel drugs and have them patented. That allows you to sell them at a premium and pay your workers, engineers and scientist high salaries.
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