Brexit Troubles Continue
The British economy in wake of the Brexit may be facing some economic issues as its Gross Domestic Product (GDP) grew by a paltry 0.1 % in the first quarter of 2018. This is the weakest expansion of growth in half a decade. Economists had predicted that a growth of at least 0.3 % was to be expected. The 0.4% expansion of 2017 has left many hopeful that the trend would continue, yet, ripples of the Brexit may be now affecting the entirety of the British economy. The weather was a consideration as snow during the first quarter reduced construction and retail sales, other areas, however, saw little to no noticeable changes. The key policy questions about Brexit’s ramifications remain unanswered by both Brussels and Downing Street, the British exit from the European Union which is in full effect in 2019 leaves many uncertain. Additionally, pressures relating to wages have slowed expansion. Alpesh Paleja the principal economist for the Confederation of British Industry said in an interview with CNN that he believes “The squeeze on real pay has held back household spending, and businesses have been grappling with ongoing uncertainty over Brexit.” Real estate has also been suffering a decline due to increases in property taxes and economic uncertainty. Many investors have held off until the ramifications of Brexit are more fully understood. According to the Royal Institution of Chartered Surveyors, the housing market in London has now reached a five year low, and commercial property sales are also slowing.
The pound has also seen a serious issue with uncertainty as it fell 0.7% to $1.38. Many people that the economic data is no coincidence, and that Brexit and its resulting uncertainty are affecting the market. One former economist and professor at the University of Warwick, Ivan Petrella called the effect "clearly not a blip." If this is true, then critics of Brexit, as well as its supporters will have to closely examine what this means for the British economy. Professor Petrella does not believe that things will improve anytime soon. He stated that “This number confirms a trend started last year of rather weak growth, which was in contrast with what was happening in other key markets," he said. "Uncertainty is going to stay there for the year to come and possibly even after the United Kingdom's formal exit from the European Union."
The European Union is Great Britain’s largest trading partner many companies have withheld investments until the Brexit is complete and its effects on the market more predictable. It is clear that some companies worry that the European Union and Great Britain will suffer strained relations, and thus strained business. Great Britain has slipped from the fifth to the sixth largest economy and is now growing at a slower rate than its continental neighbors in the European Union. Retailers have suffered and the last year saw the chain store Maplin collapse costing over 78,000 jobs. Foreign uncertainty is likely also exacerbating the situation, as reduced spending creates increased panic. Despite this, unemployment remains low and Treasury Chief Phillip Hammons remains optimistic saying that “Today's data reflects some impact from the exceptional weather that we experienced last month, but our economy is strong and we have made significant progress," and that "Our economy has grown every year since 2010 and is set to keep growing,". Whether this optimism is warranted remains to be seen as the full implications of Brexit become known.
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