As the 2016 financial calendar gets closer to its final pages, analysts in the United Kingdom are keeping a close eye on the state of the national economy months after the historic Brexit referendum to leave the European Union.
Thus far, the negative impact of Brexit has not been catastrophic for the British economy as a whole; however, the same cannot be said about the once powerful finance center within the City of London, which is preparing to face an exodus of firms dedicated to the world of investment.
At the November Banking Summit organized by the Financial Times, the top executive of Barclays, one of the most prominent British banks, explained that Brexit will not cause an immediate disruption in the capital markets. Some investment banking firms will certainly choose to move their offices to Frankfurt, Brussels or even Amsterdam; however, the major banks with the greatest capital base will still operate in the City.
Despite some firms leaving the City, a Chinese consortium has announced an ambitious plan to develop an Asian business center in London at the Royal Albert Docks. According to a recent report published by Bloomberg, this project is planned to continue despite the Brexit referendum.
Financial technology is one sector that has been hit hard in the post-Brexit period. The Financial Times has reported that dozens of startups based in London has seen their funding cut in recent months. These are startups working on projects related to online payments, digital wallets, blockchain transactions, and biometrics.
In terms of the domestic political economy, the UK faces an uphill battle to become dominant in specific industries. Analysts see this situation as being quite difficult since the UK is not quite ready to return to automotive manufacturing or textile production, at least not competitively. The best hope in this regard would be to negotiate new trade agreements that will resemble the status quo with the EU.
One of the most worrisome aspects of Brexit is related to how much it will cost British taxpayers. The UK is about to lose its European financial passport, which means that it can no longer participate in the lucrative EU market; nonetheless, this does not clear the country from its existing commitments to the EU. There are pension agreements and transnational infrastructure projects still being developed, and the UK is on the hook for $20 billion to be paid out over the next 10 years. This disbursement will not produce any income to the UK if it is no longer a member.