Impact of Brexit on the economy of UK, Germany and Spain

Running head: INTERNATIONAL MARKET INSTITUTION AND POLICIES
International Market Institution and Policies
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INTERNATIONAL MARKET INSTITUTION AND POLICIES1
Table of Contents
Impact of Brexit on the economy of UK, Germany and Spain..................................................2
United Kingdom.....................................................................................................................2
Germany.................................................................................................................................4
Spain.......................................................................................................................................6
References..................................................................................................................................9

INTERNATIONAL MARKET INSTITUTION AND POLICIES2
Impact of Brexit on the economy of UK, Germany and Spain
The proposal of Brexit was first initiated on 24th June, 2016 with 51.9% of British
voters casted their votes supporting UK’s exit from European Union (Johnston and
Buongiorno 2017). The announcement of the historical events not only affects UK’s
economy but also the effects spread on other members of European Union such as Germany,
Spain and other countries.
United Kingdom
As suggested the analysts, economic output in United Kingdom after Brexit though is
disappointing but it is not disastrous. Immediately after Brexit, the economic growth rate in
Britain jumped to 0.1 percent from a rate of 0.4 percent in the beginning of the year. The
economic activities in UK were adversely affected during this time. Despite economic
slowdown of UK, the economy was not placed much behind the other EU nation (ft.com
2019). The economic growth in UK was between 1and 1.5 percent smaller relative to growth
rate that it would have achieved without Brexit.
Figure 1: Impact of Brexit on GDP growth of UK

INTERNATIONAL MARKET INSTITUTION AND POLICIES3
(Source: ft.com 2019)
After Brexit announcement, the value of pound declined. Because of the growing
economic uncertainties the sterling has recorded steepest fall. This is shown in the figure
below.
16-Jan
16-Feb
16-Mar
16-Apr
16-May
16-Jun
16-Jul
16-Aug
16-Sep
16-Oct
16-Nov
16-Dec
1
1.1
1.2
1.3
1.4
1.5
Exchange rate
GBP/USD
Month
GBP/USD
Figure 2: Effect of Brexit on sterling exchange rate
(Source: investing.com. 2019)
As shown from the above figure, there is continuous downward trend in GBP/USD
exchange rate. The accounted exchange rate between United Kingdom and United State in
June 2016 was 1.33. After Brexit, pound depreciated recording an exchange rate of 1.32.
Since then, exchange rate continued to decline accounted to be 1.23. Depreciated currency
added to domestic inflation by increasing price of imported goods (Sampson 2017). Inflation
and on-going economic uncertainty further lowers growth expectation.
So far as state of labor market is considered, after the Brexit referendum, there is an
increase in overall employment. Not only employment increases but also there is an increase
in full-time employment. This has reduced the concern related to underemployment. Because