In the immediate aftermath of Britain’s decision to leave the European Union, there was a great deal of hasty financial analysis. Even before the UK Referendum vote there were economists and financial journalists from all over the world weighing in with various takes on the potential impact of a “Leave” vote on the British pound and on the British economy in general.

We noted ourselves back in July that the outlook for the UK economy post-Brexit was not great, even if things didn’t go completely haywire in the early weeks. That said, we have now had several months to look back upon and analyze the effect of the Brexit on the pound and the UK economy. And it’s starting to appear as if there could indeed be long-term consequences on the British currency. Let’s take a look back at the timeline since the Referendum at the end of June.


On June 23, the “Leave” vote won and the world learned that the UK would in fact be departing from the EU | Photo Courtesy: Kenny McCartney via Flickr

On June 23, the “Leave” vote won and the world learned that the UK would in fact be departing from the EU. The next day, Prime Minister David Cameron may have worsened the outlook by announcing his resignation; and not long after that Boris Johnson, who led the Conservative party in the days leading up to the Brexit, abruptly abandoned his own leadership position, furthering the turmoil in British government.

Throughout the history of UK politics, we can observe that the common connection between Neville Chamberlain, Margaret Thatcher, David Cameron and Boris alike, has been their part in letting down their country when it was in a crisis. Now they are poised to oversee the possible dissolution of the Great Empire of England.

While all of this was going on, the British pound fell to its lowest in 30 years in a matter of days. From 1.49 against the U.S. dollar on June 23, the pound was at 1.29 by July 7. Throughout July and August the pound was somewhat turbulent in nature, making few attempts at a significant comeback before falling back toward that July 7 low. But in early September, the British economy got arguably its best bit of post-Brexit news.

With strong data coming out of the manufacturing industry and the services sector enjoying a robust rebound, the pound soared to a seven-week high on September 5. It was perhaps the strongest sign that the British economy could perhaps avoid a full recession, and it signaled, however briefly, some underlying strength behind the pound.


More recently, the pound has been struggling a little bit—but in doing so, it’s raised some interesting questions about where the British economy as a whole is headed. Following new Prime Minster Theresa May’s early October statements regarding the official process of the UK pulling out of the EU (which has yet to truly begin), the pound plummeted to a 31-year low, even below the July 7 numbers. However, stepping back, it’s also possible to see this current drop as a small piece of a bigger picture. Analysts have pointed out that the pound is only at a seven year low against a bundle of other major currencies, and the current circumstances could be viewed as a reversal of sharp appreciation a couple of years ago. That doesn’t make it all okay, but it could be that the pound’s decline is more of an ordinary occurrence than exclusively a result of the Brexit.

All things considered it seems we still need a little bit of time to properly assess the true effects of the Brexit vote on the pound and the UK economy. One needs to dig deeper in the due course of time to know the true picture. For now though it appears that while a full disaster has been avoided, the UK is not off to a great economic start on its own.

Featured Image Credits: katy1279 via Flickr

Fresh insights delivered to your phone each morning. Download our Android App today!

Posted by The Indian Economist