Friday the 31st of January 2020 saw Britain finally leave the European Union, three and a half years after the marginal popular vote took place. Prime Minister Boris Johnson hailed this day as a seminal moment in British history as the UK finally “withdrew”. What does withdrawal from the European Union actually mean? Will Britain remain in the single market? What will become of the Irish backstop issue? These are all pertinent questions that will need to be addressed in the coming months, however the purpose of this article is to determine whether Boris’s big day was merely a symbolic event or whether it had actual implications for the performance of the British economy.
The short answer to this question is that Brexit Day did have a significant impact on the performance of the British economy, and it was not for the better. The first impact of the UK’s offical exit from the European Union was a spike in the strength of sterling against the Dollar.
The 31st of january saw a spike from a low of $1.2981 per £1 to a high of $1.3204 per £1, displaying a 1.721% increase, nearly half a percent higher than the next largest increase in one day in the month prior.
The implication of this sudden increase in the strength of the Pound is to potentially make British exports less competitive in international markets. The following week saw the strength of the Pound nosedive with a -2.15% decline from the 31st of January to the monthly low of 1.29236 on the 6th of February demonstrating the exchange rate instability that was caused by Brexit day.
The performance of the FTSE 100 also took a significant hit as firms felt the effect of this statement of change from the British establishment. The market dropped 1.3% to 7286.01 at close of trading on Friday the 31st of January, leading to a -3.95% drop for the week, the worst weekly performance since October 2018. Whilst there are some other external factors such as the outbreak of Coronavirus that are having an impact on the performance of the British economy, the huge fluctuation of the exchange rate and the markets on the same day as Britain officially left the European Union is not coincidental. Boris Johnson’s Brexit Day without doubt negatively impacted the economy on the 31sth of January 2020.
By Rhys Belcher
Sector Leaders: Harry Talks and Guy Baverstock