Is the Brexit Hurting Yet?

How much has the Brexit cost the UK so far? Here are some quick facts:

BUSINESSES
It’s too early to tell how UK businesses are being affected in real terms. However, business sentiment (a measure of how optimistic business leaders are) has dropped to a five year low.

HOUSE PRICES
Again it’s early days. House prices were going up before the vote. Rightmove has just reported the price of property coming to market has fallen 0.9% this past month, but it’s too early to conclude anything firm. HOWEVER, as the pound has now stabilized at a level against the euro that is 7-8% lower, and against the dollar that is around 12% lower, all assets in the UK have basically dropped in value compared to other countries.

STOCK MARKET
The FTSE (an index of large UK stocks) has recovered the initial losses and trades higher now than before the vote. HOWEVER, this is an index, and measured in Euro, due to the devaluation of the pound, the value of the underlying stocks is down about 5%. By comparison, the Euro Stoxx 50 (a comparable index of large European stocks) is now up 10% since the vote. So compared to their European counterparts, large UK stocks have lost around 15% of their value. This of course affects people’s savings and pension funds.

BUYING POWER
Over-all, as UK holiday makers have probably realized this summer, UK citizens have become poorer in foreign currencies even before the exit button has been pushed by politicians. For now consumers feel it when they look at what they can buy abroad, but the June consumer price index was up 0.5% – and it remains to be seen if this is a trend reversal. My prediction is yes. We are still far from the levels of inflation we saw just a couple of years back, but as UK supermarkets find that everything they buy from abroad has become more expensive (for example, anything bought in US dollars is now up 12%), chances are they will pass the cost on to consumers, whose buying power will be affected. But again, it’s early days yet.
So what do we conclude? Some dark clouds are appearing, but it’s probably too early to predict rain. Politicians and voters in other European countries – watch this space carefully!