London | The British were warned for weeks that a vote to leave the European Union would result in economic pain. Now they’ll find out whether it will. UK financial leaders are scrambling to reassure households, businesses and investors that they can contain the doom and gloom they had predicted in case of a British exit, or Brexit.
The pound plunged to its lowest level in over 30 years on Friday, raising concerns about price inflation, and shares in the UK’s biggest banks and real estate builders posted double-digit declines as economists predicted the country would fall into recession.
Economists slashed their forecasts for Britain, with some expecting a recession and next to no growth next year. That’s a sharp reverse for an economy that had been among the best-performing in the developed world in recent years.
In an early sign of problems, Moody’s Investors Service downgraded the U.K. outlook from stable to negative. The referendum result, it said, will herald a prolonged period of uncertainty for the UK, with negative implications for the country’s medium-term growth outlook. Holly Miller, 32, said the vote would affect her economic life profoundly. I’m quite shocked by it all, she said. I’m just applying for a mortgage so we’re worried about that.
Only the soothing reassurances of Bank of England Governor Mark Carney managed to ease the market carnage on Friday, as he pledged to stabilize markets if needed. But beyond the short-term market turmoil, the concern is what the vote means for the national economy and its 64 million people. Before the vote, with campaigning in full swing, the British Treasury had estimated that an exit from the EU would cost the country the equivalent of 4,300 pounds (USD 5,900) per household.
Tax receipts would face a 30 billion pounds shortfall that would have to be filled with tax increases on income and inheritance. House prices, the Treasury had said, could be as much as 18 percent lower by 2018 than if the country hadn’t left the EU. Campaigners for leave dismissed this as scare-mongering. With the vote result confirmed, the remain camp sought to shift away from warnings and into damage control: trying to maintain confidence in the business community and among households.
The City of London Corporation, which represents the financial services industry, a big maker of money and jobs for the country, sought to downplay the impact of the vote on the City, the square mile that is the heart of London’s financial hub.