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Friday, April 15, 2016

Threat of EU exit already undermining UK economy

The Independent reports that the Bank of England has issued its starkest warning yet over the consequences of Brexit for the British economy, stating that the country would be likely to face a long period of uncertainty if it left the EU, that would dampen demand and impact on UK assets.

They say that minutes from the latest meeting of the Bank’s Monetary Policy Committee also state that the looming referendum is already having a dampening effect on the economy, noting that many major capital spending decisions and property transactions were being delayed, pending the outcome of the vote:

In its minutes, the Bank of England said that a vote to leave the EU would “result in an extended period of uncertainty about the economic outlook including about the prospects for export growth”.

“This uncertainty would be likely to push down on demand in the short run…(and) have significant implications for asset prices, in particular the exchange rate.”

In a further warning, the Lloyds Banking Group became the first commercial bank to speak out officially on the referendum, stating that a vote to leave would cause short-term “economic uncertainty”.

However, the Bank’s statement added that the decision was “a matter for the UK electorate” and that the long-term impact was “unclear” because of uncertainty over the UK’s future relationship with Europe in the event of Brexit.

If the mere threat of us leaving the EU is dampening down the economy then we need to think seriously about the impact a leave-vote will have. This referendum is about more than the economy of course, but nevertheless its impact on our future prosperity as a country should not be under-estimated.
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