Voting to Leave the European Union Has 'Severely Hurt the British Economy'

A new survey published on Friday, July 23, shows that the British economy has been severely impacted following the vote to leave the European Union, while the economies of other European countries remain stable. According to the Associated Press, the release of new data coincides with the assessment of global financial leaders at a meeting in China, who stated that the uncertainty arising from Britain's decision to leave the EU, the world's largest economic bloc, is one of the main risks for the global economy. While the International Monetary Fund has lowered its forecasts for global economic growth, surveys conducted among hundreds of business managers in Europe indicate that the main economic damage has primarily affected Britain. The Purchasing Managers' Index (PMI) for the UK—a measure of economic activity closely monitored by investors and policymakers—fell to 47.7 in July, down from 52.4 in June. This index is measured on a scale of 0 to 100, with 50 marking the boundary between economic growth and recession. The survey conducted by IHS Markit is one of the first official assessments of the economic response to the British public's vote to leave the EU, based on questions sent between July 12 and 21 to managers of over 1,200 companies in Europe. Chris Williamson, head of the economic team at Markit, stated, 'We have seen a severe economic downturn in July, with economic activities declining at a pace similar to what was witnessed during the global economic crisis in early 2009.' He added, 'This economic recession, regardless of whether it is due to contract cancellations, lack of new orders, or the postponement or halting of project implementations, is overall a reflection of the vote to leave the EU.' In contrast, the similar index for the 19 Eurozone countries showed a decrease from 53.1 in June to 52.9 in July. This decline is limited and indicates that annual economic growth will remain around one and a half percent. The Associated Press adds that leaving the EU could mean that companies based in Britain will be separated from the European single market, losing tariff-free access, free movement of labor, and capital. In the weeks when Britain was embroiled in political turmoil, with the resignation of the Prime Minister following the June 23 vote and uncertainty among major political parties, investor confidence was also damaged. The Markit survey in Britain, on the other hand, shows that both business output and new orders fell in July for the first time since the end of 2012. The extent of this decline compared to the previous month is unprecedented in the history of the institute's surveys. The index of optimism regarding service delivery over the next 12 months has reached its lowest point in the past seven and a half years. Layoffs from manufacturing centers have also begun. This survey does not indicate an increase in business costs, while some were concerned that following the depreciation of the pound, fuel, raw materials, and imports would become much more expensive. Michael Hewson, an analyst at CMC Markets, states that this data is worse than expected. According to the Associated Press, the Bank of England is likely to approve more financial packages for the country's economic growth at its August meeting. The value of the pound has fallen from 1.32 earlier today to 1.30 against the dollar. Philip Hammond, the new UK Chancellor, has stated that he is ready to implement a budget amendment to boost the economy on the brink of a recession.