Brexit Decision Effects on the UK, Germany and Spain

This report analyzes the effects of the Brexit decision on the UK, Germany, and Spain, including exchange rates, interest rates, and stock prices.

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 1
BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN
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BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 2
Introduction
Brexit refers to a decision by the United Kingdom to exit the European Union. The European
Union is composed of 28 nations in the Europe region which together form a single market. The
United Kingdom’s decision vote to exit the European Union occurred on 23rd 2016 June (Clarke,
Goodwin and Whiteley 2017, p.439). The decision led to the depreciation of the British Pound
and caused uncertainty in business and global markets disruption. Brexit decision effects have
been analyzed for three nations namely the UK, Germany, and Spain considering the exchange
and interest rates as well as their stock prices for the months of 2016. The data used in this report
has been obtained from the “World Bank through FRED Economic Data website”.
The United Kingdom
The economy of the United Kingdom is among the richest economies not only in the Europe
region but in the whole world. The UK occupies position 3 among the 44 Europe region nations.
The UK is a European Union member but it made a decision to leave the union in 2016. Still, the
debate is ongoing to determine whether or not the nation should leave the union. The decision
affected the nation’s business activity as well as that of other trading partners (Davies and
Studnicka 2018, p.1).
Exchange rates
The UK uses pound sterling as its currency. The currency was highly impacted by the Brexit
decision as its value deteriorated (Plakandaras, Gupta and Wohar 2017, p.206). The nation’s
exchange rates against the US dollar depreciated as shown in the following data.
2016 Exchange Rate

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 3
January 1.44
February 1.43
March 1.42
April 1.43
May 1.45
June 1.42
July 1.31
August 1.31
September 1.31
October 1.23
November 1.24
December 1.25
Months prior to Brexit decision, the pound sterling exchange rates against the US dollar were
high as compared to months after the decision. The UK political uncertainty continued to weaken
the pound sterling (Jensen and Snaith 2016, p.1302). The graph for the data is shown below.
January
February
March
April
May
June
July
August
September
October
November
December
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
Exchange Rate
Exchange Rate
Year 2016
Exchange Rate
Interest rates
Base rates determine a nation’s level of interest rates. Base rates in the UK are set by the
“Monetary Policy Committee” through the nation’s Bank of England. Months before the Brexit
decision, the UK base rates were maintained at a percentage of 0.5 and hence interest rates were

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 4
a bit lower. After the Brexit decision, base rates were cut further to 0.25 percent hence lowering
the nation’s interest rates further. The data for the months of 2016 UK interest rates are shown
below.
2016 Interest Rate (%)
January 1.78
February 1.50
March 1.54
April 1.57
May 1.54
June 1.31
July 0.96
August 0.74
September 0.82
October 1.08
November 1.38
December 1.43
Interest rates declined after the Brexit decision since the nation expected economic recession and
hence had to boost the nation’s economic activity. The graph for the data is shown below.
January
February
March
April
May
June
July
August
September
October
November
December
0.00
0.50
1.00
1.50
2.00
Interest Rate (%)
Interest Rate (%)
Year 2016
Interest Rates (%)
Stock Prices
Stock Prices are also referred to as share prices. The stock prices for the UK were higher months
before the Brexit decision. However, after the Brexit decision the stock prices rose as the pound

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 5
sterling depreciated and this made companies dealing foreign currencies raise their profits as
those dealing with the UK pound sterling saw their profits decline (Ramiah, Pham and Moosa
2017, p.2509). The data for the share prices is as follows.
2016 Share Price
January 90.04
February 89.19
March 93.30
April 95.10
May 93.61
June 93.64
July 100.93
August 103.45
September 103.32
October 106.31
November 103.16
December 105.70
The graph for the data is as follows.
January
February
March
April
May
June
July
August
September
October
November
December
80.00
85.00
90.00
95.00
100.00
105.00
110.00
Share Price
Share Price
Year 2016
Share Price
Germany

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 6
The economy of Germany is categorized among the best performing economies in the world. It
occupies position 14 out of the 44 nations in the Europe region. Being a member of the European
Union it undertakes trading activities with the UK and both nations’ bilateral partnership is worth
more than €120 billion. The Brexit decision highly affected Germany as explained.
Exchange rates
Germany uses the Euro as its currency. Euro appreciated after the Brexit decision as pound
sterling declined. The data for the Euro exchange rates against US dollar is shown below.
2016 Exchange Rate
January 0.92
February 0.90
March 0.90
April 0.88
May 0.88
June 0.89
July 0.90
August 0.89
September 0.89
October 0.91
November 0.93
December 0.95
The appreciation of the Euro currency reduced Germany’s exports to the UK and increased UK
imports into the nation which were considered cheap due to pound sterling depreciation. This
highly reduced the Germany trade surplus it had with the UK (Păun 2016, p.307). The graph for
the data is shown below.

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 7
January
February
March
April
May
June
July
August
September
October
November
December
0.84
0.86
0.88
0.90
0.92
0.94
0.96
Exchange Rate
Exchange Rate
Year 2016
Exchange Rates
Interest rates
Germany lowered its interest rates after the Brexit decision as it expected an economic slump
since previously its economic growth had been declining (Belke, Dubova and Osowski 2018,
p.3752). The following data shows Germany’s interest rates before and after the Brexit decision.
2016 Interest rate
January 0.43
February 0.17
March 0.17
April 0.13
May 0.13
June -0.02
July -0.15
August -0.13
September -0.09
October 0.00
November 0.19
December 0.25
The data shows a significant decrease in interest rates after the Brexit decision. The graph for the
data is shown below.

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 8
January
February
March
April
May
June
July
August
September
October
November
December
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
0.50
Interest rate
Interest rate
Stock prices
After the Brexit decision, Germany’s stock prices slightly rose as compared to those of previous
months. This is due to the fact that the Euro currency appreciated after the decision while the
pound sterling depreciated. The data for the stock prices are shown below.
2016 Share price
January 90.35
February 85.18
March 90.19
April 91.53
May 90.32
June 88.58
July 89.41
August 94.29
September 94.27
October 95.16
November 94.19
December 99.25
The increase in share prices for Germany after the Brexit decision indicate that their businesses
operating in the UK experienced higher profits as UK businesses in Germany experienced a
decline in their profits. The graph for the data is shown below.

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 9
January
February
March
April
May
June
July
August
September
October
November
December
75.00
80.00
85.00
90.00
95.00
100.00
105.00
Share price
Share price
Year 2016
Share Price
Spain
The Spanish economy is among the better-performing economies in the world but its economic
growth is below the expected average at its region. It occupies position 28 out of the Europe
region 44 nations. Being an EU member and trading partner to the UK, it was not spared by the
Brexit decision effects.
Exchange rates
Spain like Germany also uses the Euro currency. The exchange rates for the Euro currency
appreciated after the Brexit decision whilst the pound sterling depreciated. The Euro exchange
rates against the US dollar are shown below for 2016 months.
2016 Exchange Rate
January 0.92
February 0.90
March 0.90
April 0.88
May 0.88
June 0.89

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 10
July 0.90
August 0.89
September 0.89
October 0.91
November 0.93
December 0.95
From the data, the Euro currency appreciated after the Brexit decision while the pound sterling
depreciated. Comparisons have been made considering the two currencies exchange rates against
the US dollar. The appreciation of the Euro currency decreased Spanish exports to the UK and
raised UK imports in Spain resulting in unfavorable terms of trade for Spain (Bouoiyour and
Selmi 2018, p.52). The graph for the data is shown below.
January
February
March
April
May
June
July
August
September
October
November
December
0.84
0.86
0.88
0.90
0.92
0.94
0.96
Exchange Rate
Exchange Rate
Year 2016
Exchange Rates
Interest rates
The Spanish interest rates decreased months after the Brexit decision as compared to previous
months. The nation anticipated economic slump from the decision and hence lowered interest
rates to boost business activity in the nation. The data for the interest rates for 2016 months is
shown below.

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 11
2016 Interest Rate
January 1.72
February 1.72
March 1.54
April 1.53
May 1.57
June 1.48
July 1.17
August 1.01
September 1.04
October 1.07
November 1.43
December 1.44
The graph for the data is as follows.
January
February
March
April
May
June
July
August
September
October
November
December
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
Interest Rate
Interest Rate
Year 2016
Interest Rate
Stock prices
Spanish stock prices increased slightly after the Brexit decision. This is because the Euro
currency appreciated after the decision as compared to the pound sterling which depreciated.
This means that Spanish companies operating in the UK recorded an increase in their profits as
the UK companies in Spain recorded a decline in their profits. The data for the stock prices has
been shown below for the 2016 months.

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 12
2016 Share Price
January 82.56
February 77.17
March 82.93
April 82.54
May 82.35
June 78.82
July 78.27
August 79.80
September 82.18
October 83.09
November 81.49
December 85.71
The graph for the data is as follows.
January
February
March
April
May
June
July
August
September
October
November
December
72.00
74.00
76.00
78.00
80.00
82.00
84.00
86.00
88.00
Share Price
Share Price
Conclusion
The Brexit decision caused business uncertainty and hence disrupted the global economy. It
affected many nations including the United Kingdom. Many nations especially those in the
European Union anticipated economic slumps and therefore took measures to counter them. For
instance, the United Kingdom, Germany and Spain lowered their interest rates in order to boost
business activities in their respective economies and counter the anticipated recession.

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 13
Businesses still experience uncertainties as they wait for the final decision as to whether the
United Kingdom will exit the European Union or not. Therefore, the Brexit decision affected
various economies and adjustments had to be made to counter the effects.

BREXIT DECISION EFFECTS ON THE UK, GERMANY AND SPAIN 14
References
Belke, A., Dubova, I. and Osowski, T., 2018. Policy uncertainty and international financial
markets: the case of Brexit. Applied Economics, 50(34-35), pp.3752-3770.
Bouoiyour, J. and Selmi, R., 2018. Are UK industries resilient in dealing with uncertainty? The
case of Brexit. The European Journal of Comparative Economics, 40(12) pp.52-70.
Clarke, H.D., Goodwin, M. and Whiteley, P., 2017. Why Britain voted for Brexit: an individual-
level analysis of the 2016 referendum vote. Parliamentary Affairs, 70(3), pp.439-464.
Davies, R.B. and Studnicka, Z., 2018. The heterogeneous impact of Brexit: Early indications
from the FTSE. European Economic Review, 110, pp.1-17.
Jensen, M.D. and Snaith, H., 2016. When politics prevails: the political economy of a
Brexit. Journal of European Public Policy, 23(9), pp.1302-1310.
Păun, C., 2016. Economic Consequences of BREXIT after the British Referendum. Management
Dynamics in the Knowledge Economy, 4(2), pp.307-316.
Plakandaras, V., Gupta, R. and Wohar, M.E., 2017. The depreciation of the pound post-Brexit:
Could it have been predicted?. Finance Research Letters, 21, pp.206-213.
Ramiah, V., Pham, H.N. and Moosa, I., 2017. The sectoral effects of Brexit on the British
economy: early evidence from the reaction of the stock market. Applied Economics, 49(26),
pp.2508-2514.