Is 'Brexit' already having an effect on Britain's economy?
In the wake of Britain's vote to leave the European Union, the country has seen a 鈥渄ramatic deterioration鈥� in economic activity, according to one firm's analysis released Friday.聽
In July, a closely watched indicator of the country鈥檚 economic health known as the purchasing manager鈥檚 index (PMI), produced by the research firm IHS Markit, . That鈥檚 the lowest level since April 2009, when Britain was in the throes of the global financial crisis, the firm says.
With a level below 50 indicating a contraction, according to the BBC, the survey鈥檚 release has led many analysts to conclude that the landmark decision to leave the EU could have a large-scale impact on the economy, at least initially.
" this index fall to these low levels, was the global financial crisis in 2008/9, the bursting of the dot-com bubble, and the 1998 Asian financial crisis," Chris Williamson, chief economist at IHS Markit, told the BBC. "The difference this time is that it is entirely home-grown, which suggest the impact could be greater on the UK economy than before.鈥�
Both manufacturing and the service sector, which includes businesses such as transportation, restaurants, and computing and makes up nearly 80 percent of Britain鈥檚 economy, saw notable declines in the PMI survey, .
The PMI for the service industry dropped to 47.4 in July, compared to 52.3 in June. Ahead of the Brexit vote on June 23, in the sector cited the vote to leave the EU as creating anxiety about hiring new staff.
But for manufacturers, there is one bright spot amid gloomy predictions: New exports have seen the largest increase in two years, according to Markit. That could be result of decreases in the pound鈥檚 value, economist Marcus Wright said on Twitter.
Philip Hammond, who recently became Chancellor of the Exchequer in a shakeup of the ruling Conservative Party under new Prime Minister Theresa May, told Sky News that the PMI survey indicated that business鈥� 鈥渃onfidence鈥� had been affected by the vote.
鈥�, business鈥� confidence has been dented. They鈥檙e not sure, they鈥檙e in a position of uncertainty now,鈥� he told Sky News from China, where he was due to attend the G20 meeting in Beijing, The Guardian reports.
Mr. Hammond also said he believed he could still 鈥渞eset fiscal policy鈥� during Britain鈥檚 Autumn Statement, an annual report the Treasury makes to Parliament when economic forecasts are published in the fall.
That statement could potentially mean larger policy changes if the economy declines further, .
"That opens up a host of possibilities. More borrowing? More infrastructure spending supported by the state as well as private money. Yes the government has said it wants to 'live within its means,'" Mr. Ahmed wrote. "But as with Mrs. May, Mr. Hammond might be rather more headline grabbing on changes in economic direction than some expected."
But some that the gloomy forecasts will not last, a more optimistic tone echoed by Mario Draghi, president of the European Central Bank, who said Europe鈥檚 financial markets had 鈥渨eathered鈥� the uncertainty of Britain鈥檚 vote.
鈥淪o this is a troubling set of results. But it is just one month's worth,鈥� wrote the BBC鈥檚 Andrew Walker. 鈥淚t is possible that this is a 鈥榮hock-induced nadir,鈥� as the chief economist at the firm who conducted the survey put it, and that the economy will right itself in the coming months.鈥�
