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Warring Factions Square up for Battle Royale in UK

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Brexit UK EU referndum

Major Referendum in the Works and UK Economy Ready for Anything!

With just several weeks to go, the UK is bracing for its most important referendum in recent history – the June 23 vote on whether to remain part of the EU. The so-called Brexit (British Exit) is one of the most contentious issues facing the UK populace, and both sides in this highly volatile equation are trading barbs. But in order to understand why a no vote or a yes vote is important, it is imperative that the implications of the vote are understood.

According to the counselor of the exchequer, Mr. Osborne, it doesn’t much matter which decision the UK takes in this regard. If a Brexit comes to pass, or if it doesn’t, the UK loses either way. And with so much negative sentiment swirling about the efficacy of central banks in terms of economic stabilization, not everybody is on board with the forecasts set out by the Bank of England. This is particularly true of Iain Duncan Smith the previous work & pensions secretary.

UK Economy Staring at a Technical Recession?

The UK economy has not been performing well of late, and this is easily seen in the declining GDP for Q1 2016 and the downbeat economic forecast for Q2 2016.

The GBP Brexit UK EU referndumhas been depreciating against the greenback since late 2015 when it averaged approximately 1.52 to the dollar and is now trading at under 1.45 to the USD. We are likely to see some significant economic changes taking place in the run-up to the June 23 referendum and beyond, notably purchasing behavior. The level of corporate investment and household expenditure has already declined, as anxiety about a Brexit takes center stage.

The Bank of England and its Monetary Policy Committee (MPC) are anticipating Q2 GDP growth to decline to 0.3%, from its current projection of 0.5%. More importantly, the UK is likely to see an uptick in unemployment, a further depreciation of the GBP, and a spike in inflation. This will make it difficult for the Bank of England to determine which policy objectives to pursue: price stability or production capacity and employment.

What is Likely to Happen?

It is exceptionally difficult to speculate on possible economic outcomes when working with macroeconomic data. The numbers seem to suggest that the UK will vote to remain in the EU, if only by a slim margin. However, if we take the other possibility that the UK leaves the EU, one of the latest analysts to join the monetary policy committee – Michael Saunders of Citibank – believes that interest rates in the UK could rise by as much as 3.5%, and inflation could jump 4% in the aftermath of a Brexit. Borrowers certainly don’t want to face the prospect of higher interest rates in the UK, but savers will welcome such a change. Currently, the interest rate is 0.50%, and any upside move will hurt those with long-term mortgages. If by some slim chance the UK leaves the euro zone, interest rates will have to rise to combat the inflationary pressures. It seems odd that at a time of such global uncertainty, the UK would entertain the notion of massive destabilization in the form of a Brexit.

 

31 COMMENTS

  1. My personal opinion is that UK should exit from the dictatorship of EU and will gain more staying away from it. But all said and done, the end result will be that UK will ultimately stay in the EU, this all seems to be pre-decided.

     
  2. Totally agree with what you say here. The only outcome I see for the UK leaving the EU are bad ones like unemployment which you mentioned. Personally I hope the UK does stay in the EU, and right now it seems to be going that way which is great.

     
  3. I agree. It is most likely that the UK will vote to remain in the EU. In all honesty it is the best thing to do really.

     
  4. Given the recent deprecieation of the GBP I think something needs to happen. They need to leave if it will make the GBP more stable.

     
  5. There are quite a few factors to take into account when determining whether the UK should leave the EU.

     
  6. It’s very tough to know what will happen with the U.K. I’m not sure what exactly Cameron is planning and what the parliament for the U.K. will want. Even the Queen, must ponder what exactly would be the best course of action.

     
  7. flexibility is positively related to working conditions, such as skill development, active jobs and involvement in decision-making and is also positively related to

     
  8. Leaving the EU wouldn’t result in war (Although yes we are being threatened subtly by the leave politicians of war and economical problems, to something we never even voted to opt in for) 🙂 but I’m talking more specifically about qmv and Lisbon treaty. If we don’t escape this time, which is the last officially peaceful chance UK has, we will face qmv. There are many things they keep hiding, changing the small print, etc, but as of the signing via Gordon Brown to this Lisbon treaty, we may not leave unless the EU has the majority consent of all eu states in the future. of course there are very few people who look any further than what they can find on a top layer relative to eu laws and regulations, and most have no idea what the Lisbon treaty even is sadly. Ignorance sure makes it easy for those corrupt guys who own us all. 🙂

     
  9. The UK wont leave the EU and it will never happen, the British public will lose a lot of benefits such as : freedom of movement, cheaper flights and the big European companies won’t do business with the UK.

     
  10. There is indeed a lot on the line. The UK economy wants to succeed, but that would mean breaking ranks and causing discord with other countries. No matter what, it will be a hard decision.

     
  11. I think personally we will not leave the EU, but it’s going to depend, to a large extent, on how the news coverage plays out over the next few weeks as I think this is going to have a massive impact on how people vote. it’s going to be interesting, that’s for sure!

     
  12. If leaving the Euro zone would make the interest rates high, I’d rather be within it and enjoy its good benefits. Every people needs everyone and so I’d rather be with the EU.

     
  13. Im sure the UK will do the right thing….I hate to see their economy in recession and hopefully it wont effect other nations.

     
  14. I hope the UK recovers from their bad economy. I wish them the best in the future. It seems like they are prepared to overcome and fix the issue they have with their financial status. Wish them the best of luck.

     
  15. I sincerely hope the UK finds a way to get their problems fixed. I hope they make the right choice on whether to remain part of the EU or not. I don’t like to see any economy suffer. I hope it gets better for them. I think the UK will do what’s right for them. I think they are strong enough to come out of the bad situation and get stable again.

     
  16. It is a disgrace that our country which was once so great is have so many problems especially financially. Our economy should be booming especially with still being in the EU and I only see more financial problems and a struggling economy if we do leave the EU. The cost of living is likely to rise and cost to travel to other countries also. The only way to improve our economy is to stay with the EU.

     
  17. Very informative article, the best I have read for a while regarding the referendum. I believed staying in the EU was for the best for the UK and this article backs up what I previously thought. thank you

     
  18. It’s an important time and hopefully things work out for the best.It seems like they are prepared to overcome and fix the issue they have with their financial status. Wish them the best of luck.Totally agree with what you say here. The only outcome I see for the UK leaving the EU are bad ones like unemployment which you mentioned. Personally I hope the UK does stay in the EU, and right now it seems to be going that way which is great…

     
  19. Thank you for the article. I appreciate being able to get some real solid facts on the internet occasionally. Good luck UK.

     
  20. Great article! Very interesting with it of information and facts. I learned a lot from reading this! Very informative!

     
  21. I say more power to UK and good luck. I wish here (United States ) that we could have another civil war and put things back how our forefathers intended!

     
  22. Good luck to the UK – this is a very important time for them and a huge decision – I hope it works out for their best interests!

     
  23. As one that will be voting on the 23rd I can see the signigicance of my vote. Both those in the EU must remember and respect the heritage and wishes of the United Kingdom in this referendum!

     

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