Greater Birmingham Chambers of Commerce
This Week in Brexit: The Economy
21 days later and there’s still plenty of surprises in store in our new, post-referendum world:
The pound rallied on Thursday, closing 1.5%, up against the dollar at $1.3341 and 1.25% higher against the Euro at €1.2002. However, the pound remains significantly below its pre-referendum levels on both fronts.
This has proved to be great news for some exporters, among them online fashion retailer Asos who are expecting to see something of a Brexit bonus as their US and EU based customers take advantage of comparatively lower prices in their domestic currencies.
FTSE 100 and FTSE 250
While the FTSE 100 hit an 11 month high earlier on Thursday, it closed 0.2% down following the Bank of England’s announcement that it will not be lowering interest rates this month. Investors had been hoping to hear news of economic stimulus.
Meanwhile the FTSE 250 closed 0.2% up. Overall it’s been a good week for the FTSE 250 as Monday’s revelation that Theresa May would become our new Prime Minister buoyed the market. May has been seen as a relatively “safe pair of hands” by investors (see my next post, This Week in Brexit: Politics for the full story).
There were further property related woes this week. After a bad week on commercial property funds last week, this week it’s the turn of residential property. According to the Royal Institution of Chartered Surveyors (Rics), surveyors are generally expecting property prices to fall in coming months. However, the extent to which these concerns will become a reality remains to be seen. Their June survey also showed record numbers reporting a fall in the number of homes going on the market and the largest proportion reporting a fall in new buyer enquiries since 2008.
A report by the Bank of England also found that lenders were expecting demand for mortgages to fall following the UK's vote to leave the EU.
The Bank of England surprised City analysts on Thursday. Contrary to predictions, the BofE’s Monetary Policy Committee voted 8-1 against lowering interest rates. They will remain at 0.5% for the time being.
However a loosening of monetary policy remains very much on the table with the committee predicting a vote in favour of stimulatory measures in August. Precisely what this will involve will depend on how the economy fares over the next three weeks.
The news on interest rates caused the pound to rally, but also knocked the FTSE 100.
This Week at the Chambers
It’s been another busy week at the Chambers. On Tuesday we launched the latest version of our flagship Quarterly Business Report (Q2 2016). Our event examined investment in Greater Birmingham in light of the “Brexit” vote. Our expert guest speakers (Matthew Hammond, Regional Chairman of PwC, Nigel Hinshelwood, Deputy CEO of HSBC and Head of HSBC UK and Professor Simon Collinson, Dean of Birmingham Business School) gave their take on the city but we also spent a significant portion of the event discussing and feeding back on delegates’ views of how Brexit has affected their business. You can read our report here and the first of two articles on the speeches here. Keep your eyes peeled for the second and a blog post from my colleague Stephanie Wall, Senior Policy and Patron Advisor, on the discussion coming soon.
We are in the midst of surveying members, alongside the British Chambers of Commerce, on the immediate impact of the EU Referendum result (Click Here to take part). We also have newly updated content on our EU Referendum hub (Click Here) including links to free resources from our Chamber Patrons.
As ever, if the EU Referendum result has affected your business, we would really value hearing about your experience. Contact me on H.Brealey@Birmingham-Chamber.com
Henrietta Brealey is Director of Policy & Strategic Relationships at the Greater Birmingham Chambers of Commerce.