UK exit from the EU will cost its economy 1-1.2% growth over the next two years, while the euro zone may be short of 0.8% of GDP , estimated by analysts Standard & amp; Poor`s. Weak pound could partly compensate for the decline, but, given the substantial trade deficit, the state of the British economy will depend on how much reduction would be significant investments. Experts point to the possibility of deregulation in the financial sector in order to attract new capital – but is most likely still build the monetary support of the Bank of England and the ECB.
“The main economic impact of the output of Great Britain from the EU will be concentrated in the country, but the consequences for the euro area will also be visible”, – said in a new forecast of the rating agency Standard & amp ; Poor`s. On it lowered the country’s rating by two notches last week – to AA. UK will miss 1.2% of GDP in 2017 and 1% in 2018, and “barely avoid a recession,” the agency forecast (forecast takes into account the preservation of access to the single European market for at least the next two years). However, the “increased uncertainty requires to be wary of any forecasts”, – the authors of the report acknowledge. Note the formal application for withdrawal from the EU London has not yet filed. If this happens, the negotiations will be difficult and will last at least two years, is expected in S & amp; P (on the name of a possible negotiator, see page 6..).
The weakening of the pound, which is expected to last, and for the next year and a half, can support the British export growth – but is unlikely to cover the current deficit of the trade balance (equivalent to 7% of GDP) . While the deficit is financed by capital inflows (foreign direct investment – 3.6% of GDP, portfolio – 4.8%), but their further inflow will depend on the nature of the negotiations with the EU, believe in S & amp; P. Risk is the elimination of a number of headquarters of the financial companies in London. The result is expected in the ING Bank, the Bank of England is likely to be forced to cut interest rates to zero by the end of the year. The S & amp; P and does waiting for the resumption of quantitative easing (QE) in the next year, despite the projected increase in inflation (from 23 June to pound lost 11% of the cost, with the beginning of the year – 15%).
In the euro area growth recovery will not stop, but the currency bloc countries also will miss the order of 0.8% of GDP in 2017-2018, believed in the S & amp; P. Brexit, in particular, can prevent to outline YTD accelerate capex growth. The most direct effect will be negative through trade in Ireland, Belgium, Luxembourg and the Netherlands – while France and Germany are the major investors in the British economy. Brexit offset the effects of the ECB will again expect the agency, noting that low interest rates contributed to the growth of credit and reduction of the debt burden has increased the demand for real estate (the risks of such an approach has already warned the IMF – see “Kommersant” on July 4th.).
Brexit theoretically would allow the UK to give up part of the regulation in the financial sector, in particular, restrictions on the payment of bonuses and performance for hedge funds directive, but to attract new capital required and to facilitate regulatory caused by the fight against tax evasion, says Oliver Williams Wealth Insight.
The main reason for concern is the new regulation in relation to residents living abroad (non-doms, allows not to pay tax on foreign income), proposed by Finance Minister George Osborne – it presupposes the payment of income tax and capital gains tax, if a resident lives in the UK for over 15 years. “In any case, the interest of wealthy people in London is unlikely to decline,” – believe in the company, noting, however, that the current market downturn led to a reduction of 15 largest states on the $ 5.5 billion in real estate market prospects assessment experts is diverge. . The Wealth Insight believe that the weak pound will support demand in the S & amp; P, on the other hand, expect that prices will fall this year and next will stagnate.
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