The British economy is not sinking, contrary to the expectations
Written by Ivo Hristov; Originally appeared at A-specto, translated by Borislav exclusively for SouthFront
After the referendum on June 23, 2016, the world mourned the poor Brits. Hollande and Merkel were not cheap with their ruthlessness. “The separation will be without concessions” said the French president. European Commission President Jean-Claude Juncker, was quick to reassure Europeans that “The Brexit does not mean the end of the EU”. The German Finance Minister even said that he believed “the British are also crying, but it’s pointless. They should have thought ahead of time” stated the iron Schaeuble. Even the Bulgarian Euro-claqueurs were pointing a finger at the “dumb Britons”, the “villagers from Wales” who do not know how to vote. In the hours after the referendum, the rating agency Standart & Poor’s lowered the credit rating of the UK with two levels due to “unpredictable and uncertain political context.” The London Stock Exchange hit historic lows, and in the weeks after the quake, the German business community stated their appetite to challenge the primacy of the City as a financial center of Europe, and the second largest platform for financial transactions in the world. The Frankfurt Stock Exchange stated its willingness to expand its operations. The television channels also aired reports of desperate British entrepreneurs who are looking into an uncertain future with empty eyes.
The realists however, prophesied something else: if Britain sinks, the EU will stabilize over the instructive example of the Brexit, but if the British departure proves successful, then many countries would be tempted to follow the islanders and the disintegration of the EU is a matter of time.
Four months later, the statistics are comforting. Alas for the EU. British society is experiencing a difficult moment, racist outrages are multiplying, the future looks unclear, the calls for Scottish independence are again on the agenda, negotiations for the Brexit are yet to come, the conditions for the divorce to be yet specified. But the economy is recovering faster than the fleeting confusion. Contrary to the apocalyptic predictions, growth in the third quarter, which began just after the referendum, is 0.5%. The fortune tellers prophesied 0.3 percent, with the most pessimistic even talking about a recession. Their forecasts did not materialize. “For the moment, the economic growth outlook is not affected by the Brexit, and most dynamic remains the service sector” said the British statistical office. It does not seem that the financial agents of the City, intend to move to Frankfurt or elsewhere. A slight decline was observed in industrial production, but there is encouraging news. Nissan yesterday announced its intention to invest, in its plant in Sunderland. “The government gave us assurances,” explained the head of the company Carlos Ghosn, without specifying.
Consumption of British households remained almost unaffected by the referendum, and while the British pound depreciated against the dollar and the euro, it regained some of its value after the announcement of economic statistics for the third quarter. Analysts say the effect of the Brexit is yet to be felt because inflation is creeping up, and this will raise the price of imported raw materials and enterprises will slow down or limit their investment programs. However, expectations for a dramatic collapse did not materialize and London will start negotiations for its withdrawal from the EU in decent condition. Britain is determined to preserve its access to the 500 millionth European market. “President Hollande seems to be of the opinion that we can not impose tighter control of the borders and still preserve the free market with the EU, but I think otherwise” stated Prime Minister Theresa May, after his meeting with the French head of state.
Meanwhile, Europe is entering an election year. German Chancellor Angela Merkel and the French President will be willing to accept certain concessions to London, so as to not rock the EU boat unnecessarily, which is taking in water from many places. The two leaders are in a vulnerable position and have an interest to not open a new front against London. Paris and Berlin have enough problems with their Right, and with terrorism, so they would be unwilling to raise the stakes against Britain. Trade relations with Britain are very important for the stability of European economies, so they are unlikely to be burdened with tariffs and restrictions. It seems that the moment of the Brexit was well chosen, and London has all the chances to preserve their free access to the EU. In essence, to get rid of the burdensome commitments to Brussels, without losing the advantages of the European market.