Many affected areas – Real estate, business, jobs, pound sterling: nearly two weeks after the historic decision of the British to leave the EU, concerns about the economic impact Brexit begin to materialize.
The Brexit did not take long to feel the brunt of this fundamental sector of the UK economy booming in recent years. Unable to cope with requests for frightened investors wishing to recover their shares, three Standard Life funds, Aviva Investors and M & G Investments managing a total of more than 9 billion pounds of assets in commercial property (offices, stores …) have been forced to close temporarily.
Worrying sign, this phenomenon had not been seen since the crisis of 2008. As a result, property values and financial groups exposed to real estate plummeted in recent days to the London Stock Exchange. But beyond the Bourse and these complex financial arrangements, it is all the construction sector which is seized. First indicator released in June, the month of June 23 referendum, the PMI construction index contracted for the first time since mid-2013 and at a rate that had not been recorded since 2009, during the property crash caused by the financial crisis.
In the midst of balances, the British somewhat deserted shops. According to figures released by the firm Springboard, attendance at “high streets” (main shopping streets) fell 11% Tuesday 28 and Wednesday, June 29 compared to the same period of the previous year. “People’s attention was diverted shopping and they may be concerned with all this uncertainty about what we will become,” said Diane Wehrle of Springboard.
More broadly throughout the service sector, predominant in the UK economy, the first signals are negative. The sector PMI index, released Tuesday, showed a slowdown in June, many companies have delayed or canceled their orders due to the uncertainty surrounding the Brexit. Although the study period mainly covered the day before the vote, this slowdown could, according to the Markit firm that publishes this index, lead to growth brake on 0.2% in the second quarter against 0.4% in first.
The job market begins to darken
In top form in recent years – according to the latest official statistics of unemployment 5% in April, the lowest level in 11 years – the job market begins to darken. In services, the hiring rate was registered in June to its lowest level in nearly three years, according to Markit. And more worryingly, according to CEB Talent Neuron, the number of job advertisements published in the country after the vote (June 23-July 4) was divided by almost two to 817,376 against 1.466 million the previous week.
The lowest in 31 years against the dollar, the pound slumped nearly 15% against the dollar and the euro since the vote on the Brexit. Likely before the first signs of imported inflation materialize because of higher prices for many goods purchased abroad, the fall of the book already has a concrete impact for Brits going on holiday in Spain and France in particular, who will see their heavily slashed budget. The result is similar to their many compatriots settled in the south of Europe for their retirement.
Exporting companies derive however advantage of this decline in British currency, their products become more competitive in the UK and beyond. But uncertainty about the continued access to the single market concerns, particularly the automotive sector that produces the UK more than 1.5 million vehicles a year, mostly exported to Europe. This sector has also begun to pay cash for this uncertainty by recording in June a decline in registrations of 0.8% year on year, the first decline since October.
The Brexit led to a further downgrade of the United Kingdom by Standard and Poor’s from AAA, the highest possible, to AA, and Fitch, AA + to AA. Moody’s, the third major rating agency, it has threatened to lower it.
The Brexit weighs heavily on Belgian 10-year rate
The Brexit also continues to weigh heavily on the 10-year rate in Belgium but also in Germany, the reference in the field. Wednesday morning, the Belgian 10-year rate stood at 0.157%.
The reasons are known: in these uncertain times, investors are trying to reassure opting for bonds from countries considered “safe”. But strong demand pushing yields lower. June 23, day of the referendum in Britain, the Belgian 10-year rate still stood at 0.485%.
On June 29, it had risen to below 0.25% and 2 days later, under that of 0.2% before reaching this Wednesday, the floor rate of 0.157%. The situation is no better in Germany, where the rates are even moved into negative Wednesday in -0.19%, a historic low. Negative rates were also recorded in Switzerland and Denmark, while in the Netherlands, they are located just above 0.