WellTax Blog

There is one year left until Brexit, the first budget for the British economy

March 29, 2018

One year after Theresa May invoked Article 50 of the Treaties, the countdown to Great Britain’s exit from the European Union begins.

The transaction period would last until the end of 2020, according to the agreements with Brussels, but the symbolic date remains 29 March 2019. The point of the situation is this.

Real economy

Brexit supporters place emphasis on the ability of the British economy to have absorbed the blow, at least the sudden recession hypotheses that were expected did not materialize. The weakening of the pound has penalized consumers, but it has boosted exports, which increased by 6% last year.

EU supporters, however, say that the British economy has gone from being the most dynamic in Europe to being at the bottom of the G-7. Annual GDP growth, which was 2.3% in 2015, slowed to 1.7% in 2017 and forecasts are for +1.5% in the current year.

According to Steven Andrews, multi-asset fund manager at M&G Investments, “There is no such thing as a positive Brexit, only a less worse Brexit because it generates uncertainty”. The trade agreements that Great Britain manages to stipulate will be fundamental for investment decisions”.

Monetary policy

The Bank of England raised rates to 0.5% in November 2017 and hinted at further increases this month; inflation, although falling, remains well above the planned rate of 2%.

Explains Wolfgang Bauer, Retail Fixed Interest fund manager at M&G Investments, “In the event of a good Brexit, Great Britain will participate fully in the synchronized global economic recovery. In the event of a bad Brexit, the BoE could defend the pound. In both cases, there are good reasons to raise rates.”

The City

The exodus of banks and bankers from the City did not occur, but the transfer of staff affected only 5 thousand people out of the 75 thousand estimated by the Bank of England.

In publishing the guidelines on the future of financial services, the Bank of England launched a reassuring message: during the transition period it will be “business as usual” and even after 2020 there will continue to be very close cooperation between London and Brussels in matter.

The fact is that the City will continue to be a city of more international than European importance according to recent Chinese real estate investments.

Article from “Il Sole 24 ore”

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