What Did Cause the Value of the Pound to Go Down after the EU Referendum?
The EU Referendum that took place in June 2016 provided a significant influence upon the numerous aspects of the UK economy. One of them is the falling of the local currency. This event took place in view of some reasons.
One of the main reasons is the decrease of investments into the country’s economy. The authors of “Implications of the Brexit Referendum” (2016) predicted before the Referendum that it will also lead to an investor sentiment decline and an economic activity’s slowdown in the UK. The authors also see the possibility for weakening of the activity further in case uncertainty after Brexit makes executives of the companies to delay recruitment plans and investment in the nearest future (“Implications of the Brexit referendum”, 2016, p. 4).
One more reason is uncertainty and fear concerning the situation after Referendum. According to Pareshkumar, Narendra, & Ashok (2014), macroeconomic and geopolitical events are among the major reasons of currency exchange rate decline. In case of wars, elections, changes in monetary policy, financial crisis, the country’s currency is affected significantly. The above-mentioned geopolitical and macroeconomic events may influence other economic parameters of the country also (Pareshkumar, Narendra, & Ashok, 2014, p. 54). This all makes the investors and management of the large companies to postpone or cancel many investment and employment initiatives.
Investments decrease affects many sectors of the UK economy. According to Clacy-Jones (2016), the UK voters’ decision to leave the EU will provoke investment markets volatility, including, for example, the market of real estate (Clacy-Jones, 2016, p. 3).
Taking into account the above information, it is possible to conclude that the main reasons of the Pound’s falling are the decrease of investments and uncertainty related to the overall economic situation in the country. It is also possible to predict that the outcomes of the Referendum may have also long-term consequences for the country.
Clacy-Jones, M. (2016). UK EU REFERENDUM RESULT. Knight Frank LLP, 3. Retrieved from http://content.knightfrank.com/research/1076/documents/en/eu-referendum-3864
Implications of the Brexit referendum. (2016). Brooks Macdonald Group, 4. Retrieved from http://www.brooksmacdonald.com/~/media/Files/B/Brooks-Macdonald/documents/2016-q2-brexit
Pareshkumar, J., Narendra, J., & Ashok, R. (2014). Factors affecting Currency Exchange Rate, Economical Formulas and Prediction Models. International Journal Of Application Or Innovation In Engineering & Management, 3(2), 54. Retrieved from http://ijaiem.org/volume3issue3/IJAIEM-2014-03-05-013