Brexit
On June 24th the United Kingdom voted on a major decision; should they remain a part of the European Union or part ways? The verdict of the people was to leave the European Union. This was no small event and the waves of the result were almost instantaneous. On the day of the election the pound hit a 31-year low against the US dollar, stock markets slipped and gold rose – thanks to the uncertainty in the financial markets. So the question arises how does the Brexit affect the American economy?
The link between the US economy and the UK
In 2015, the U.S. exported USD 56.4 billion worth of goods to the U.K and imported USD 57 billion worth from the U.K. As you can see the U.S. economy has deep financial links with the U.K. Right now the U.K. is U.S.’s seventh-largest trading partner and accounts for 3% of the total trade. The close ties are further reflected by the fact that U.K is America’s number one exporter and importer of good and services.
So .? Despite the Brexit vote the U.K. has shown over the years that it is a business friendly nation with low security costs and a large talent pool.
The current weakness of the pound against the dollar is a huge benefit for American start-ups in the U.K. as now they will have to deal with dipping property and labor costs thanks to the benefits achieved from the favorable exchange rate. However American people and businesses working in U.K. who repatriate their funds into dollars have been hit.
However one disadvantage is that many U.S businesses had long viewed the U.K. as a “launching-pad” for the rest of Europe. This advantage could be lost in the upcoming brexit negotiations. However for existing American businesses in the U.K, the silver lining is that completing the exit procedures will take almost two years so there won’t be any overnight concerns.
Another good news is for the people who were considering a foreign vacation or education. Thanks to the brexit the cost of a vacation in the U.K and college tuition has gone down. For students especially this is a good opportunity. The U.K. has some of the world’s best colleges and universities. and the cost is definitely one of them if you do not want to be trapped in huge student loans.
In the short-term the only worry to the U.S. is that due to the Brexit there might be some disruption in global financial flows. This is because London in the U.K. is New York’s rival as the top center of global finance. In the long run however, the global financial system is likely safer in London – which now has complete political independence from the European Union.
