Brexit Playing Long-Game Re: Destroying British Economy

The not-terrible-in-the-short-term effects are a trap!
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By ukhomeoffice [CC BY 2.0], via Wikimedia Commons

via Wikimedia Commons

So it’s been almost two months since 37.5% of British voters decided to take their country out of the European Union. And in spite of the direpredictions of economic devastation and a return to a state-of-nature like condition in old Albion, things are looking pretty good: The stock market is back on form, people are hopefully renting new commercial office space, the pound has not fallen below the Cambodian riel in value, the islands have not sunk into the North Sea. The whole thing may even force those plucky Brits to live within their means for a change. All seems disturbingly calm and well in Theresa May’s England.

That’s exactly where Brexit wants things, lulling the British into complacency and then, BAM! You wake up in a rainier Venezuela.

Even if the short-term damage proves more muted than feared, there is nothing that monetary or fiscal policy can do to offset the long-term supply-side hit to the U.K.’s potential growth rate that almost all economists agree is inevitable….

Depending on what agreement is reached, U.K. output is likely to be between 2.5% and 6% lower than it would otherwise be, according to a study published last week by the Institute for Fiscal Studies, a respected London-based think tank….

Mrs. May has stunned the City with an 11th-hour delay to a high-profile nuclear-plant deal backed by the French and Chinese governments. Any perception that a post-Brexit Britain will become less investor-friendly risks worsening the supply shock to the economy, given the well-recognized relationship between investment and long-term productivity growth.

Three Questions to Determine Fate of Post-Brexit Britain [WSJ]
U.K.’s Current-Account Deficit Stands to Shrink After Brexit [WSJ]

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