Pro and anti-Brexit compete in a moderate uncertainty

Both sides still confront each other about the Brexit. One stressed that the expected catastrophe didn’t occur while the second one considered that it hasn’t started yet. When one analyzes the economic data from UK after the vote in favor of the Brexit on June 23, 2016, one sees that the predicted catastrophe didn’t materialize indeed but one must however remain cautious. The withdrawal clause included into the Lisbon Treaty (Article 50) that allows a member country to leave the European Union (EU) may not be used by the British government before 2017 and could even be delayed until late 2019.

From the institutional and legal standpoint, UK is still a member of the EU and the Brexit’s consequences may emerge only when such process of exit starts. “We’re still nowhere and nobody knows what will be the impact (of Brexit),” warned Bernard Keppenne, Chief Economist at CBC. However, and considering the financial markets often integrate such parameters in anticipation, it’s clear the consequences have been generally limited so far.

In July 2016, tourism was up 4.5% fueled by a favorable exchange rate of the British pound (GBP), consumer confidence remained high, consumption rose 1.6% and unemployment fell unexpectedly by 8,600 job seekers compared to the previous month. Conversely, the construction index slumped 46% while the price of London’s real estate slowed its bullish trend, rents fell 6% in the City and a number of foreign companies suspended their investment in UK.

This is moderate uncertainty that is prevailing among those who saw the invalidation of the disaster scenario and those who interpreted the good macroeconomic data as anticipation by British people of tougher time afterwards. Meanwhile, the UK could better overcome Brexit than expected if its national economy evolved enough by 2019 to better “absorb the shock,” like the resurrection of industrial policy initiated by the new British Prime Minister Theresa May. If the disaster was finally happening, at least UK would have had some more time to prepare.