Brexit: Six things we learnt last week

Brexit Insights
By Andrew Harbison, CA Today

1 August 2016

A round up of last week's biggest Brexit news.

1. Stephen Hawking on Brexit

Renowned physicist Professor Stephen Hawking turned his gaze from the mysteries of the universe to an enigma much closer to home this week.

In an article appearing on The Guardian website last Friday 29 July, he considered how the way we perceive wealth and money may have affected the result of the EU referendum.

As a vocal supporter of the remain camp, Professor Hawking believes that the “narrow definition of wealth” and a culture of “envy and isolationism” that currently exists, played a part in the decision making process of over half of UK voters who chose to leave the EU.

Stephen Hawking

In his view the definition of wealth should be extended beyond money to “knowledge, natural resources, and human capacity”. 

Source: The Guardian Picture credit: The World in HDR / Shutterstock.com

2. What the future holds for VAT

Among the multitude of laws and legislation that connect the UK and the EU is value added tax (VAT), at its heart a European tax.

There may be talk of scrapping it, but, as Donald Drysdale writes, that is very unlikely.

VAT is levied through the EU, a key feature of the single market. The UK may remain part of the single market post-Brexit, but this is impossible to guarantee until negotiations conclude.

VAT does not hinge on the UK being part of the EU or the single market. 135 non-EU countries have similar schemes.

Whether or not there will be any changes is hard to say until the Brexit negotiations are completed.

Source: ICAS

Money

3. Consumer confidence falls, business confidence rises

Market research company GfK found that UK consumer confidence suffered the fastest drop in 26 years, while a separate survey saw a rise in business optimism. 

The latest GfK survey found that consumer confidence is at -12 this month compared to -1 in June, the biggest monthly drop since 1990.

The drop is most likely a result of the initial shock of Brexit, but The Telegraph reports that the head of GfK said it is still at "relatively elevated levels by historical standards".

Lloyds conducted a separate business survey which found that business confidence is on the rise after the announcement of the new cabinet.

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, told The Telegraph: “Our July survey shows a rebound in both business prospects and economic optimism.

"Although some concerns remain about wider economic prospects, business activity expectations have surpassed the level in May before the referendum."

Source: The Telegraph

4. The impact on the UK's trade relationships

James Barbour, ICAS Director, Technical Policy, examined the UK’s trade relationships with the EU and the rest of the world.

Drawing on figures recently released on the HMRC website, it is clear that the EU is a vital part of the UK's trading presence. 

The figures detail import and export data between May and June 2016. It shows that seven out of the UK's top ten biggest import/export countries lie within the EU. Therefore, James said, "it is also very much in several EU member states’ interests to negotiate a trade deal with the UK".

The figures also show that the UK imports a large amount of goods from the US. This should give the UK a strong position to negotiate a future trade deal, raising Britain’s profile as a global trading power.

Source: ICAS

5. A positive outlook for the housing market

The UK house price index is slowly edging upwards post-Brexit, according to reports.

Figures show that prices are up 0.5% on last month and 0.1% higher than the same month last year.

Houses

However, the figures are based on the mortgage offer stage and Nationwide's chief economist warned that there is a short lag between a buyer making the decision to purchase a property and applying for a mortgage, meaning "the effect of Brexit may not yet be evident".

This Is Money reported that house builder Taylor Wimpey said it's "business as usual", as the company's profits are in line with its usual forecast. 

Source: City AM, This Is Money

6. The fate of EU citizens in the UK

Prime Minister Theresa May said that she can only guarantee the rights EU citizens currently residing in the UK if those rights are observed for UK citizens living in the EU. 

The comments came during a joint press conference with May and the Italian Prime Minister Matteo Renzi on Wednesday 27 July. May previously refused to comment on the rights of EU nationals living in Britain during the Tory leadership contest. 

The fate of EU citizens in the UK has been a topic of much confusion, post and pre-referendum. During the referendum campaign the vote leave camp insisted “that there will be no change for EU citizens already lawfully resident in the UK. These EU citizens will automatically be granted indefinite leave to remain in the UK and will be treated no less favourably than they are at present.” 

Source: The Guardian


Brexit Insights: Share your views

We are looking for CAs to contribute their views and analysis on Brexit as part of our new Brexit Insightsseries, to help shape the future of business and accountancy in the UK.

Get in touch with the ICAS Brexit team if you would like to be involved.

Topics

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