Impact of Brexit on UK economy

On June 24, 2016, the results of the Brexit referendum were settled. The victory of the Brexit party announced that the friendship between Britain and the EU for 43 years had been turned over. (Santolo, 2019). Brexit not only affected the living standards of British citizens but also influenced the economic development of the UK. In this essay author will illustrate the relationship between the output and national income, even the connection with nominal GDP and real GDP according to “Squeal at no deal.”

The article shows the reduction in output can affect overall national income.

We can use a formula to explain that is AD=C+I+G+NX, C means consumption spending. In this circular flow, Consumer expenditure is a function of income; this says that consumer spending changes as income changes. (AMADEO, 2018). Please refer to the following graph, AD moves to the left; many reasons can illustrate it. Firstly, consumer confidence fell to the lowest level in five years, as Brexit-‘s uncertainty left shoppers in the coming months in fear of stability of the UK economy.

(Inman and Butler, 2018). GfK’s Joe Staton said: ‘In the face of rising costs, the threat of rising inflation and the uncertainty of the outcome of the Brexit negotiations, consumers are in a depressed mood. They all look at the prospects of 2019.'(Inman and Butler, 2018), the data display the consumer’s outlook for the general economic situation in the next 12 months fell by one point to -27, but the personal finance expectation in the next 12 months fell 3 points to 5 points.

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The savings index also decreased by 4 points. (Woodhouse, 2018) Secondly, the government’s analysis shows that if the UK leaves the EU, the UK economy will shrink and wages will fall in various situations. (Merrick, 2018)At the moment, most of the UK exporters seem to correspond to depreciation by raising additional profit rather than price cuts. If they keep their prices constant concerning the current price (as much export goods are priced in foreign currencies as much as currency import data), sales will not change, but net profit will be going up. While this helps to explain the lack of improvement in net trade, it increases the mystery as to why nominal wages are not responding to higher import prices. If the profits of exporting companies are rising due to depreciation, what about giving some of them to their workers? One right answer is that the labor market is weak, and what prevented the real wage from further falling is that companies do not like to lower nominal fees. Under these circumstances, there will be no reason for exporters to share their higher profits with their labor force. Therefore, the direct impact of depreciation is not a decline in terms of trade (export price/import price), but a change in the distribution of wages and profits. However, many people believe that even if the unemployment rate drops sharply, the labor market is not weak. (Lewis, 2017)