Author: Tejvan Pettinger

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What they didn’t tell you during EU referendum debate

Some thing that weren’t always made clear during EU referendum. Economic experts are worth listening to. A string of senior ‘leave’ politicians lined up to say you shouldn’t listen to economists making warnings about short term and long-term damage to economy. But, just because economic analysis is inconvenient to your point of view, doesn’t alter the fact, if you leave EU, there will be fall in confidence, fall in inward investment, falling Pound and a negative impact on trade. The impact is hard to define precisely, but the basic rationale…

Free movement of labour – advantages

Free movement of labour – advantages

Definition of free movement of labour – It means that workers are entitled to look for work in another country, without requiring any visa. Free movement of labour is a fundamental principle of the EU. It means EU citizens are entitled to look for a job in another EU country. Also, qualifications are universally accepted across Europe and in theory, there should be no discrimination for firms choosing between native and migrant workers. Free movement of labour is generally considered to have worked quite well, when the EU was…

Will Brexit cause recession?

Will Brexit cause recession?

Will the UK’s decision to leave the EU cause recession? Factors which could cause Brexit recession Loss of confidence. Many foreign investors may be deterred from investing in the UK because of uncertainties that they may have higher costs for accessing the Single Market. This decline in investment could lead to fall in aggregate demand. Decline in consumer confidence and spending. The uncertainty over Brexit may encourage consumers to increase their savings ratio and reduce spending. Consumers may also be hit…

Winners and losers from a weak Pound

Winners and losers from a weak Pound

The Brexit vote has led to sharp fall in the value of the Pound, at one stage falling to £1 = $1.33 – a fall of over 10%. This will have a significant impact on British firms, consumers and also those outside Europe. In short: A weak Pound makes foreign goods / foreign holidays more expensive. A weak Pound make British exports cheaper. Who benefits from a weak Pound? Firms selling goods abroad. Foreign buyers need less currency to buy the same quantity of UK goods.  Therefore a weak pound means…

public-sector-debt-ons

UK National Debt

The UK national debt is the total amount of money the British government owes to the private sector and other purchasers of UK gilts. In May 2016, Public sector net debt (ex. public sector banks) was £1,606.9 billion, equivalent to 83.7% Source: (page updated June 22nd 2016) ONS Datasets | Long run fiscal indicators PSA5A at ONS | Budget deficit – annual borrowing This is the amount the government has to…

Why would Pound Sterling fall after Brexit?

Why would Pound Sterling fall after Brexit?

If the UK vote to leave the EU, many predict the Pound will fall significantly. Investor George Soros predicted it could be a bigger fall than in 1992 ERM crisis. Soros claims the Pound could fall by up to 20% (BBC) There are different reasons why the Pound may fall. Uncertainty. Leaving the EU would create uncertainty amongst investors. This would discourage both portfolio flows and inward investment.Therefore, there would be less demand for buying Pound Sterling to invest in the UK. Lower domestic investment. The uncertainty…

UK levels of foreign direct investment (FDI)

UK levels of foreign direct investment (FDI)

Foreign direct investment involves the transfer of funds to be involved in capital investment in a foreign company. For example, if a Japanese firm, like Toyota builds a factory in the UK, this counts as inward investment into the UK. Foreign direct investment does not include portfolio investment, e.g. Chinese saving money in UK banks or buying bonds FDI and balance of payments Inflows of inward investment count as a credit on the capital (financial) account of the balance of payments. However, if profit from the investment goes back to the…

Cost and benefits of EU in perspective

Cost and benefits of EU in perspective

I wrote a while back that I was a rather unenthusiastic supporter of remaining in Europe, and perhaps it wasn’t that important. In recent weeks, I have become more committed to staying in Europe, and feeling leaving the EU would be a regressive step. Bigger perspective The EU was formed out of the Second World War and a continent continually fighting amongst itself. The EU has played a role in changing the European continent for the better. It’s easy to take this for granted, but it is quite an achievement. The second…