Unit 2. Economy how ‘brexit’ could change business in britain

The issue of “Brexit” remains divisive in Britain, with little agreement on how it will affect the country’s economy.

Britain will almost certainly be out of the bloc by the end of March 2019, and Prime Minister Theresa May wants it to be a clean break. 

But companies are reassessing their long-term investments in Britain, fearful of how Brexit might affect trade across the European Union. And while Britain and Europe are negotiating over what happens to European Union citizens who now work in Britain (as well as Britons who work in other European Union countries), no one is sure how those talks will go.

Here is how the Brexit vote has shaped business thus far:

The British economy appeared to weather the negative forecasts that followed the referendum. But signs are emerging that the country could be feeling the effects.

The FTSE 100 index has gone up about 17 percent since the close just before the referendum vote on June 23.

The impact of the vote has been felt most sharply in the markets.

The pound has dropped 10 percent since it was valued at $1.47 just before the decision to leave the European Union. In fact, it has plummeted, at one point reaching its lowest level in 31 years against the dollar. In the aftermath of the referendum, mutual funds dependent on Britain’s property sector felt the strain and blocked panicked investors from withdrawing their cash en masse.

For Britons, there are worries about inflation as a cheaper pound increases the cost of imports. The currency’s decline set off a brief price dispute involving a supermarket chain and the consumer goods giant Unilever, which threatened to take some staples – including Marmite, a divisive yeast-based spread – off grocery shelves. The cost of products from Apple and Microsoft has also spiked.

Inflation has accelerated to its fastest pace in four years, and economic growth has slowed, as well. Wages are not keeping pace with price increases, and Britons are increasingly feeling the pinch.

The Bank of England has sought to respond: After the referendum, it cut interest rates to the lowest level in its 322-year history. The central bank may soon move to cut its stimulus program, though.

Amid the uncertainty, businesses are preparing as best they can.

More than a quarter of major financial companies in Britain say they will move staff members or operations overseas, or are reviewing their domicile status, according to a survey. Major investment banks like Goldman Sachs, JPMorgan and Morgan Stanley say they will move jobs to the Continent in the coming years to mitigate risks.

Even Lloyd’s of London, a centuries-old insurance market, is opening a Brussels subsidiary.

The plans are just a few examples of moves that some fear could harm the health of London’s financial center, known as the City, which represents a big chunk of the British economy and contributes a disproportionately large slice of the country’s tax revenue.

Other crucial sectors like scientific research and automotive manufacturing are also worried, and even restaurant chains are hiring more British staff members in case foreign workers have to leave. Major ratings agencies have warned that they could could downgrade Britain’s credit rating if it emerges from negotiations on leaving the bloc with a poor deal.