There have been a variety of discussions in the media regarding the economic hardships that the UK will face following Brexit.
Financial experts have been putting forward their arguments since the EU Referendum was announced in February 2016. But what have the experts been advising and warning us will happen once the UK leaves the EU?
Michael Saunders, one of Britain’s most prominent economists and a member of the Bank of England’s Monetary Policy Committee, in a speech in Cardiff in August this year, discussed the impact that immigration into the UK has had on the British economy. Over the past five years, a high proportion of job growth and growth in workforce has been created by migrant workers. These workers have been attracted to the UK by the relatively resilient pay and employment levels, alongside free movement of workers and labour that comes with being a member of the Single Market.
Workers from EU countries also consume goods and services, which keeps the economy afloat. Saunders argues that since workers are also consumers, inward migration has also supported economic growth in the UK. The UK economy has been able to recover from the financial crisis partially because consumption has been high. Foreign workers have helped boost consumption, and therefore the wider economy, significantly.
Saunders suggests that consumption has slowed down since the referendum, for two reasons: surging inflation pushing up prices for everyday goods; and the slowdown in inward migration, as more consumers are leaving the UK than are arriving. Simply put, EU nationals are less willing to move to the UK for work and thus the UK economy now has fewer consumers. As we have previously discussed, the Office for National Statistics has reported that the overall number of EU citizens coming to the UK has dropped significantly since the referendum result in June 2016.
Saunders also suggests a variety of factors that drive workers away from the UK:
From a different perspective, on the 11 July 2017, whilst on a regional visit to Aberdeen, Ben Broadbent, the Bank of England’s deputy governor for monetary policy and one of its most important policymakers, summed up the risks to the economy posed by Brexit when he stated the following:
The EU is the UK’s largest trading partner, with around half of all UK exports and imports going to or coming from the Single Market. EU economies are highly developed, so our trade with the EU focuses less on labour intensive goods and services, than that with developing economies, and focuses more on financial services, insurance, and other services focused exports. Essentially, a significant curtailment of trade with Europe would force the UK to shift away from producing the things it’s been “relatively good at”, and therefore tends to export to the EU, and towards the things it currently imports and is “relatively less good at”. When the UK leaves the Single Market, it will need to negotiate a wide-ranging trade deal with the 27 EU Member States, which is something that could take years. Moving away from exports like financial services and insurance that the UK was providing to the EEA, and towards exports like raw materials and food provided for less economically developed countries, would have a detrimental impact on the general economic welfare of the average Brit and the economy as a whole.
Sassa Karakatsianis, Immigration Specialist
September 21, 2017UK visa & immigration consultation
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