Category: Brexit

Why has the British Pound (GBP) depreciated since the BREXIT vote?

Selin Ozyurt

I made this video in 2017, a year after the Brexit vote. In 2020, the Brexit chaos still continues and the exchange rate of GBP did not recover to its pre-referendum value. The reasons below are still relevant to explain the current weakness of the GBP.

In this video, I answer the following questions:

1. What is an exchange rate?

Exchange rate is the value (or price) of a currency compared to another one.

2. What determines the exchange rate?

The market: Supply and demand. When there is a strong demand for a given currency, this currency appreciates, vice-versa.

3. What happened to the exchange rate British Pound (GBP)?

The British Pound (GBP) has strongly depreciated right after the Brexit vote, up to 20% against the euro for instance. The exchange rate of the pound did not recover to its initial value since then.

4. Why has the British Pound depreciated?

3 mains reasons explain the deprecation of the GBP:

Reason 1: The UK economy is expected to be POORER and LESS PRODUCTIVE in the coming years, compared to the situation where it stayed in the EU.

  • The UK has significantly benefited from the access to the EU Single Market. Being a part of the European supply chain enabled UK producers to produce in a more efficient way by cutting production costs.
  • The reestablishment of border controls and custom duties would make the UK LESS attractive for foreign investors and diminishes demand for GBP.

Reason 2: Monetary policy: Low Bank of England policy interest rates

  • Investors tend to buy assets of countries that offer high interest rates (and high returns). Therefore, high policy interest rates increase the demand for the currency of this country.

Reason 3: UNCERTAINTY around the future UK-EU relationship

  • Markets DO NOT LIKE uncertainty! Investors prefer to invest in other countries than the UK and this lowers again the demand for GBP.

I hope you find the video helpful. Please leave me a comment to give me feedback or further questions.

If things works well, I would like to come back with new videos on “low interest rates and the policy challenges” they imply.

SEE YOU SOON?

Brexit and the Loss of Financial Passport: How are the Brits being Fooled?

Selin Ozyurt

#Brexit Facts

Today let’s discuss an extremely ‘unpopular’ topic that the UK politicians (both Labour and the Tories) have skilfully avoided since the Brexit vote. Surprisingly, the issue was also omitted from the General Election campaign: The UK will lose its financial passporting rights after Brexit!

Working for the ECB back then, I can tell that on the continent, the approach was fundamentally different. Right after the Brexit vote, we all knew that the loss of financial passporting rights was an ‘obvious’ consequence of the UK leaving the EU. Thus, various EU institutions started to get prepared to the new financial environment bringing about both challenges and sizeable opportunities for the EU. More importantly, this was no secret: While delusion and denial reigned in the UK, the ECB and the IMF officially called the UK-based banks to anticipate their relocation to the continent in order to smooth the transition process. Below, I will give you some basic facts to illustrate the gravity of the situation and how badly it is being handled by the UK government.

Why do financial services matter to the UK economy?

The financial services sector is the backbone of the UK economy, creating a significant share of value added, employment and tax revenues. Based on a narrow definition of financial services (excluding other finance-related activities), financial and insurance activities accounted for 7% of total UK Gross Value Added (£120bn) and also 7% of total UK employment (1.1m people) in 2015. Financial services generated 11% of overall UK tax revenues (£66bn) and attracted 45% of total Foreign Direct Investment in the UK.

The EU is the biggest market for financial services and the UK runs a large trade surplus in financial services vis-à-vis the rest of the EU. In other words, it exports more services to the EU27 than it imports from them. In 2015, the UK trade surplus with the EU27 amounted to £19.1bn in financial services. In particular, the City of London, is a major global hub providing wholesale financial services to the EU, such as trading and clearing of derivatives, foreign exchange transactions, repurchase agreements (repos), securities issuance, etc.

What is financial passporting?

‘Financial Passporting’ is the foundation of the EU single market for financial services. It facilitates cross-border trading by enabling institutions (e.g. bank, insurer fund) from one-member state to sell financial services across all EU states. For instance, (under the Capital Requirements Directive IV) a bank based in the UK can directly provide credit services to a corporate based in another EU state.

Cross-border banking activities of the UK with the EU (e.g. deposit taking, mortgage loans) highly rely on financial passport. In this way, UK banks can operate in a cost-efficient way, without having to set up subsidiaries in other member states (which would be subject to the host country financial supervision/ regulation and additional capital requirements).

On the other hand,  it is almost impossible for a non-EU firm to obtain a licence to provide cross-border banking or investment services to EU customers.

What will happen after Brexit?

One thing is extremely simple: After Brexit, the UK will not be able to keep the passport for the EU financial market if it seeks to restrict immigration and free movement of the labour. On top of this, retaining the passport (full access to the EU financial market) would also imply that Britain will continue to take the EU regulation on board without having any ability to influence it and will be subject to rulings of the European Court of Justice.

In the UK, the Brexit debate happens in a highly self-centered way, dominated by a misplaced sense of economic supremacy. Thus, the Brits are totally overlooking a key element: The EU does not want the UK to retain the passport for the EU financial market! Moving finance jobs back to the major EU cities, such as Frankfurt, Luxembourg, Dublin or Paris, is perceived as a great opportunity for the EU to improve scale and efficiency in financial services.

All in all, given the current Brexit stance of the UK government, keeping the financial passport appears highly unlikely. What is next then? After March 2019, financial firms will no longer be able to provide services from their UK headquarters to the rest of the EU. As a result, ten thousands of high paying jobs would migrate to the EU and this will lead to a significant fall in tax revenues. In addition, weaker demand for financial services in the city of London is likely to be a serious drag on economic growth.

This brings us back to my initial point: Since the Brexit vote, both Labour and the Tories preferred to keep the passporting issue vague, giving the illusion that there was some room to negotiate. The fact-based reality is that leaving the Single Market and restricting the free movement of labour means no more free access to the EU financial market. Obviously, this will have disastrous consequences for the UK economy in terms of growth, employment and tax revenues. Once again, Brexit politics chose populist hypocrisy and denial over a comprehensive cost estimation of leaving the Single Market.

The Hidden cost of Brexit: How much could border controls and bureaucracy harm the UK manufacturers?

Selin Ozyurt

#Brexit Facts

Recent debate on Brexit has extensively discussed how badly would leaving the EU affect the UK services sector. Obviously, this is a worrying issue which could cause massive job losses, particularly in financial services sector. However, in this post, I would like to discuss the Brexit-related challenges to the UK manufacturing sector. This topic has received only limited attention despite the high economic cost it is likely to involve.

 

Why is the manufacturing sector important to the UK?

Manufacturing exports account for 45 per cent of total UK exports. Pharmaceuticals, aerospace, motor vehicles are the key export-oriented sectors of the UK. The EU is the largest export destination of the UK, accounting for 52 per cent of total exports. The UK manufacturers are strongly integrated into the EU supply chains where natural resources, raw materials and components cross the EU borders a few times before being transformed into finished products. To be more precise, nearly half of the UK’s intermediate goods imports and exports are with other EU countries. The EU27 supply chain also relies on the UK but to a smaller extent: The UK accounts for only 10 per cent of the EU27 intermediate goods exports/imports. The larger exposure of the UK to the EU27 supply chain as well as its relatively small size (only 17% of the EU27 GDP) suggest that any disruption to existing production networks after Brexit would be more harmful to the UK manufacturers (than to the EU27 ones).

Why is Brexit likely to disrupt the EU supply chain? After Brexit, the UK’s borders with the EU will all become external and will be subject to customs controls following the EU law/WTO rules. Under all possible Brexit scenarios (e.g. EEA, CETA, Customs Union, WTO) customs controls and non-tariff barriers are likely to imply  additional costs to trade, also in terms of waiting time.

Why does the waiting time matter for the supply chain? The EU and UK manufacturers follow the ‘just-in time’ principle which makes it necessary to move parts and components quickly and efficiently around the EU. In this way, producers keep stocks at a minimum level to reduce costs. Let’s take the automobile sector as example: The Society of Motor Manufacturers & Traders, estimates that imported components from the EU account for 60 per cent of a ‘British-built’ car. In the same way, two-thirds of UK motor components, are exported to the EU producers to end up in ‘foreign-built’ cars. Even a few days of delays due to customs controls could severely disturb production networks of the automobile industry.

Currently, the Brexit trade debate focusses on negotiating Free Trade Agreements and disregards the additional ‘trade cost’ implied by borders controls, non-tariff barriers and bureaucracy. Most UK exports to the EU are operated through the Channel ports which currently lack the staff, physical infrastructure or software capacity to deal with all-encompassing border controls.

Moreover, even under a zero-tariff agreement with the EU, the re-introduction of ‘rules of origin’ could seriously harm the UK/EU supply chains. In short, ‘rules of origin’ refers to a cumbersome bureaucratic procedure where exporters will have to prove that their goods originated in the UK and that everything that enters the UK has a verified country of origin. All in all, the resulting paperwork, custom delays and compliance costs could seriously paralyse the supply chains by making the UK suppliers less attractive to the EU producers. Recent evidence shows that some companies have already started to replace their UK supplier by the EU ones.

Could the UK manufacturers dump existing EU supply chains and quickly set-up new links in the UK?

The short answer to this question is ‘NO’. The UK workforce is severely lacking ‘vocational’ skills highly  required in sectors such as electrical and mechanical engineering. Without skilled workers in place, it will be almost impossible to build a self-sufficient infrastructure for the UK within a two-year period. Even with ‘good’ educational policies (which are rather unlikely to happen), it would take several years to train the UK workers. Moreover, restrictive immigration policies will not be of any help in filling the skills gap during this transition period.

All in all, my take is that even under a Free Trade Agreement with the EU, Brexit could severely harm the UK manufacturing sector due to the re-establishment of border controls. To minimise the adverse impact of Brexit on supply chains, targeted human capital formation policies should be quickly put in place in order to tackle the UK’s skills shortage problem after Brexit.

 

Why a Free Trade Agreement with the EU cannot replace the Single Market Access?

Selin Ozyurt

#Brexit Facts

Current Brexit debate makes it clear for Britain that leaving the EU would also mean leaving the European Single Market. Surprisingly again, there is no clear communication on the economic implications of this decision as well as on how much damage would leaving the Single Market cause to the UK economy.

In this post, I will discuss why the EU Single Market access mattered for the UK and whether or not a Free Trade Agreement with the EU could be a good substitute to the Single Market?

The short answer to the second question is ‘NO’! The EU Single Market access cannot be replaced by a trade arrangement for various reasons:

Services Trade with the EU matters to the UK economy!

The EU is the largest trade partner of the UK in services. The UK sells more services to the EU countries than it buys from them. In 2015, services trade with the EU generated a surplus of £21 bn. In addition, more than 80% of the UK jobs are in services and services production creates more value added in the UK compared to the manufactured goods.

The picture is radically different when we look at trade in goods with the EU. The UK doing much worse in exporting manufactured goods and has a structural trade deficit with the EU in goods. Moreover, the UK manufacturing sector is extremely small (accounts for 10% of total employment) and much less productive compared to other advanced economies.

All in all, services trade is key to the UK economic growth!

Why would a Free Trade Agreement with the EU not work for services?

 A Free Trade Agreement for goods ensures that no taxes, tariffs and other barriers would be imposed on goods that are traded within a specific area. This could function pretty well between the UK and EU as goods can be easily traded from distance and be shipped from the seller country to the buyer.

Things get much more complicated when it comes to trade in services: First al all, services trade means setting up shops and offices overseas and people travelling to sell and buy the services in question. This goes without saying that the free movement of people becomes one of the key elements here. More importantly, trading services makes it necessary that the same set of rules applies to all trading partners. To illustrate, take services like finance, healthcare, restaurants, airlines etc. Their free trade from one country to another requires common rules and regulations to establish a level playing field. In the same way, to guarantee a standardised product quality to customers, mutual recognition of the traded products would be necessary.

Here the difference between the Single Market and a Free Trade Area becomes critical: There is no comprehensive free trade deal in place between major economies so far. By definition, a free trade area in services would require free movement of capital and people (in addition to goods) and the establishment of a single set of rules.

One thing is sure that the EU would always set the rules for the EU market. If the UK decides to continue to sell services to the EU market, it would need to implement the EU regulation without having any possibility to influence it. This is exactly the case of Norway. In order to keep its Single Market access, Norway contributes to the EU budget (as much as the UK) and allows the free movement of people.

To summarise, in contrast to what was said in the Brexit propaganda, UK setting its own rules and freely trading services with the EU is simply not compatible! This is also surprisingly missing from the current Brexit negotiations debate which, to my sense, will end up but taking or leaving whatever deal the EU will offer to the UK.

I hope you found this article helpful. Please leave me a comment for feedback and questions.

 

 

 

Brexit woes & the UK economy: Which policies to damage control?

Selin Ozyurt

#Brexit Facts

­Brexit implies heavy consequences for the UK economy at least in the short and medium term. For the moment, I will stop dwelling on the reasons why Brexit is economic suicide and discuss policy actions to mitigate its adverse impacts.

Let’s have a quick look at the state of the UK economy, exactly a year after the Brexit vote:

  • Low growth & high inflation: The UK economic growth slowed down in 2017 amid high uncertainty of Brexit negotiations, low investment and consumption spending. Inflation stood at 2.9% in May 2017, well above the 2% policy target of the Bank of England. High inflation was mainly driven by rising import prices (e.g. raw materials, energy, food) as a result of pound depreciation. Rising inflation had the consequence of decreasing the real earnings of the UK households.
  • High consumer debt: As a response to a stricter regulation of mortgage lending, the UK credit institutions  have been expanding their unsecured loans in 2017 . Thus, credit card lending and car finance grew at pre-crisis levels. More worryingly, the UK household saving rates declined to historically low levels in 2017. Precautionary savings serve as a cash cushion for households during ‘bad times’. Put differently, high debt and low savings make the UK consumers more vulnerable to economic/financial shocks during these uncertain times.

Brexit constitutes a major challenge for the UK policy makers. Since the economic crisis in 2008, the Bank of England has followed an accommodative policy stance (low interest rates + Quantitative Easing) to support economic growth. However, almost a decade of historically-low interest rates and unconventional monetary policy measures have rather contributed to building-up debt, both public and private, and asset-price bubbles in certain sectors. All in all, without the support of the economic policy (which was rather stuck in austerity), loose monetary policy was not enough to create the necessary conditions for a truly self-sustaining economic recovery.

The Bank of England’s next interest rate decision is scheduled on August 3rd. In a context of rising inflation and slowing growth, the Bank is facing an uncomfortable decision. The members of the Monetary Policy Committee expressed mixed opinions on whatever or not to start raising policy interest rates already.

Clearly, increasing inflationary pressures should be not ignored for long time to prevent the de-anchoring of long-term inflation expectations. In this sense, an interest rate hike could support the exchange rate of the pound and put the break on rising import prices. However, considering the ongoing fragility of the UK economy, raising interest rates ‘too soon’ may have disastrous consequences in terms of economic growth and household debt sustainability. For instance, high interest rates may further depress internal demand (investment and consumption) by making bank credit ‘too expensive’. Furthermore, most mortgage loans in the UK are contracted at variable or short-term fixed rates. Therefore, even a small rise of interest rates could make monthly mortgage payments more expensive, putting household budgets under increased pressure.

To my opinion, an interest rate rise already in August might be ‘too early’ in an environment of “anaemic” wage growth and Brexit uncertainty. Therefore, I believe, macroprudential measures could be more effective in tightening credit growth without endangering the economy. For instance, on 27 June, the Bank of England introduced higher capital requirements for major credit institutions. In other words, banks will have to put more capital aside for new lending. This was a good step in the right direction, in order to tame consumer credit growth without putting ‘debt sustainability’ under stress.

Of course, monetary policy cannot tackle all alone  the Brexit woes of the UK economy. The UK needs a good ‘policy-mix’ of gradual and timely monetary tightening together with fiscal expansion in the form of public investment in productivity-enhancing infrastructure. Since decades, the UK lacks a coherent and long-term strategic vision in infrastructure investment. Compared to the peer economies, the UK is ‘singled out’ because of its poor infrastructure in transport, telecoms and energy sectors. More importantly, the infrastructure deficit of the UK is detrimental to growth and largely explains the poor productivity of the UK industry.

The UK public debt is currently at historically high levels and the country has almost no fiscal space to introduce expansive fiscal policies. Obviously, addressing the UK’s deficit in infrastructure requires private-sector capital and expertise to complement public policies, which have failed so far.

I hope you found this article helpful. Please leave me a comment for your feedback and questions.

What is next? Will the pound depreciation continue in 2017-2018?

Selin Ozyurt

#Brexit Facts

Part 2

Exchange rate developments are hard to predict as they react to various internal/external developments at the same time. This being said, I will discuss 3 key issues, which suggest that the pound will not recover to its value before the Brexit vote and may depreciate even further against major currencies in the years to come.

1. Persistent uncertainty regarding the EU-UK relationship in the future: The triggering of the Article 50 implies that the UK will leave the EU in March 2019. After being delayed due to general elections, UK started Brexit negotiations started in June 2017 without a mandated government and a clearly communicated strategy. Moreover, given the legal and practical complexity of reaching a satisfactory arrangement, it is very likely that the Brexit talks continue for some time. Markets do not like uncertainly, moreover the pound is not an international reserve currency in the same way as the dollar is. As a result, business and consumer confidence, which are already at low levels, may deteriorate further throughout the year. Therefore, I expect investors to continue to shy away from the pound, which will hinder the recovery of the exchange rate.

2. Prospects of low growth and productivity: The governor of the Bank of England stated in June 2017 that weaker real income growth was likely to accompany the transition to new trade arrangements with the EU. The UK is expected to be poorer after Brexit with lower incomes bringing weaker demand and an economy functioning under its potential. The Bank of England and many major institutions have recently lowered their UK growth forecasts up to 2019. Obviously, weaker growth expectations will continue to hold the value of the pound down in the future.

3. Monetary tightening in the US and euro area: Investors seeking high returns purchase assets of countries that offer high interest rates. That is to say, high interest rates render a country’s assets attractive to foreign investors and increase the demand for for the country’s currency. Obviously, this higher demand triggers the appreciation of the currency. 

After almost a decade of accommodative monetary policy, growth and unemployment in the US and euro area are finally recovering. The Fed has already started to gradually raise interest rates and the European Central Bank is also preparing to do so. Turning to the UK, the picture is rather different:  Economic growth decelerated significantly in the first quarter of 2017. On the other hand, the UK inflation reached 2.9% in May 2017, a rate well above the 2% policy target. Therefore, the Bank of England is facing a tremendous policy challenge. Raising interest rates ‘too soon’ in an environment of continued economic uncertainty and weak demand is likely to hinder economic activity. On the other hand, lack of reaction to inflationary pressures may also pave the way to ‘stagflation’, a concertedly dreaded illness by economists and policy-makers. All in all, the decoupling of the UK interest rates from the rates of the other major economies would result in a relatively weak pound exchange rate vis-à-vis the dollar and euro.

Based on these three aspects, my take is that, pound is unlikely to recover to its value before the Brexit vote and could depreciate further in 2017-2018. In an import-relying economy like the UK, a weak currency drives inflation up by making imports of energy, food, raw materials and intermediate goods more expensive. The UK producers declare that they have not yet fully passed the increasing input costs on retail sale prices. This implies more inflation and lower real incomes in the future.

Next Thursday, I plan to discuss the appropriate policy responses to the UK’s economic challenges. A largely missing topic from the current political debate…

I hope you found this article helpful. Please leave me a comment for feedback and questions.

 

Evils Never Come Alone: Brexit & Sharp Depreciation of the Pound – What is Next?

Selin Ozyurt

#Brexit Facts

One of the immediate consequences of the Brexit vote in June 2016 was the sharp depreciation of the pound against virtually all major currencies. The pound has not recovered since then and showed strong volatility during major political events (e.g. May’s October 2016 Speech, the announcement of the snap general election). It is striking that the UK government did not communicate much about the causes and consequences of the depreciation. In the general election campaign the depreciation  was treated as an external ‘calamity’ and his painful consequences for the Brits were mostly excluded from the political debate.

Main economic impacts of  the currency depreciation on the UK economy are:

  • High inflation, mostly driven by high energy and food prices
  • Erosion of the purchasing power and wealth of households
  • Declining real wages (for the first time since mid-2014)
  • Weaker demand: slowdown of consumption and investment

As opposed to Brexiteers’ expectations, a cheaper currency did not support growth by boosting  exports. The economy lost momentum and the UK became the slowest growing G7 country in the first quarter of 2017.

Part 1: Why did the pound fall sharply after the Brexit vote?

Let’s have a closer look at the reasons behind the dramatic fall of the pound. You will see that, the ‘why’ of the depreciation is tightly related to the policies followed by the government. I will only mention 3 guiding principles of international finance, which will explain the situation:

  • Financial markets seek to price ‘today’ what they expect to happen in the ‘future’.
  • Capital tends to flow to countries that can make productive use of it or where assets are safe.
  • Investors do not like uncertainty!

The pound fell immediately following the Brexit vote as markets believed that UK economy would grow slower and be less productive after leaving the Single Market. The core belief was that the value of the pound would remain persistently low after Brexit. Thus, massive pound sell-offs followed the  vote. The perverse effect of the sell-offs was  immediate pound  depreciation although the UK economy was doing ‘fairly’ good at that time.

This brings me to the next question: Why would the UK economic growth and productivity slowdown after leaving the EU? UK economy has significantly benefited from access to the Single Market via increased specialisation (especially in financial services) and better efficiency. In this sense, leaving such a large common market is equivalent to a ‘deglobalisation’ shock and scaling down production. To illustrate, financial services being scattered across major European cities would mean less specialisation, less efficiency and lower productivity for the city of London.

Moreover, restrictions to labour migration will eventually weigh on  growth and productivity. Skill shortage is already a serious issue in some  sectors such as information technology, healthcare and engineering. More importantly, the UK immigrant workers happen to be more educated on average than the natives. All in all, labour migration restrictions  are estimated to reduce the UK GDP by 0.6% to 1.2% until 2020  (Portes and Forte 2017).

Here is the warning by the HM Treasury before the Brexit vote:

“If voters choose to leave the EU, Britain would be “permanently poorer”! Productivity and GDP per person would be lower in all alternative scenarios, as the costs would substantially outweigh any potential benefit of leaving the Single Market. Separating from the EU would reduce GDP by 6% to 7.5% permanently.”

Last but not least, financial investors do not like “uncertainty”. The uncertainty around the future UK-EU relationship was one of the major forces driving the pound down over the last year. In particular, the incoherent approach of the government to the negotiations created serious doubts about their capability to negotiate an ‘acceptable’ deal for the UK. In an uncertain economic environment, firms adopt a ‘wait and see’ approach and delay investment decisions. Again, weaker investment becomes a drag on economic growth and productivity.

UK General Election 2017: Why is ‘economy’ being the elephant in the room?

Selin Ozyurt

#Brexit Facts

2017 UK General Election was all about Brexit, which is expected to be a long, painful and unprecedented process. Obviously, before making up their opinions, voters needed some clarity on how the parties planned to handle the Brexit-related issues.

Public debate in the UK General Election campaign was overwhelmingly dominated by issues like health & social spending on the elderly, nuclear weapons, terrorism, policing & security.

Have you noticed that there was a huge omission from the election debate and journalists let both parties get away with that? Yes, it is about Economics! Economy featured very little in the campaign of both major parties with no comprehensive debate on how they would  handle the heavy economic consequences of Brexit. Actually, they did not even bother to give an estimated cost of Brexit under the “hard Brexit” scenario which happens to be the favourite option of both Labour and the Tories (so that the UK can take the control of its borders back).

The UK economy is already showing serious signs of weaknesses mostly driven by the uncertainty surrounding the future EU-UK relationship. Let’s have a quick look to the UK economy as it stands in the first half of 2017:

  • Since the Brexit vote, the British Pound has been depreciating dramatically (about 18%), however exports growth remained disappointingly weak, aggravating the negative contribution of external trade to GDP.
  • Inflation stands well above the target of 2% and the Bank of England expects it to remain close to 3% throughout the year.
  • High inflation is eroding the purchasing power of consumers and real earnings are declining further every quarter.
  • The UK public debt is at historically high levels and lower growth prospects coupled with uncertainty surrounding Brexit negotiations is likely to reduce investors’ appetite to hold UK debt, also in the medium-term.

Against this background, I will pick only 3 issues from a long list of issues to be discussed in the 2017 UK General Election campaign:

  • Pound depreciation does not seem to naturally support the exporting sector. The UK manufacturing sector is extremely small, accounting for less than 10 % of total labour force. Moreover, it is highly inefficient with lower productivity than Italy’s. What kind of policies have the leaders in mind to enhance the exporting sector after leaving the EU?
  • Leaving the EU means leaving the Common Agricultural Policy (CAP). So far, the UK farmers have heavily relied on CAP subsidies, which are worth about £3.5bn a year, making up about 55% of farmers’ incomes. How would the farming sector survive without the EU funds? Would there be a new UK fund allocated to farming?
  • UK public debt is already at historically high levels. Brexit will result in a dramatic decline of tax revenues as a consequence of following developments: Lower economic growth, high inflation, loss of financial passporting rights for the EU, lower demand for services, the relocation of financial activities and the qualified migrants to the Continent, etc. How will the new government cope with declining public revenues without increasing taxes (as higher taxes would further drag the economy down)?

Whoever wins the election, (s)he had to deal with these issues immediately. Then, why was ‘economy’ the elephant in the room during the entire campaign? Did both Labour and Conservative parties even have a plan to deal with these key economic challenges coming with Brexit?

How many Brexiteers do still believe that there is a ‘cake’ and they will truly eat it soon? Sadly, post-truth politics thrived in the General Election and history repeated itself in less than a year. In the name of democracy, UK voters were asked to make a crucial choice for future generations without having any clarity on what they are signing for.