Brexit In Reverse?
Economic reality is beginning to catch up with the false hopes of many Britons that the UK's withdrawal from the EU will not reduce their standard of living. The Brexit referendum cannot be undone, but people can change their minds about what their vote meant.
LONDON – Economic reality is beginning to catch up with the false hopes of many Britons. One year ago, when a slim majority voted for the United Kingdom’s withdrawal from the European Union, they believed the promises of the popular press, and of the politicians who backed the Leave campaign, that Brexit would not reduce their living standards. Indeed, in the year since, they have managed to maintain those standards by running up household debt.
This worked for a while, because the increase in household consumption stimulated the economy. But the moment of truth for the UK economy is fast approaching. As the latest figures published by the Bank of England show, wage growth in Britain is not keeping up with inflation, so real incomes have begun to fall.
As this trend continues in the coming months, households will soon realize that their living standards are falling, and they will have to adjust their spending habits. To make matters worse, they will also realize that they have become over-indebted and will have to deleverage, thus further reducing the household consumption that has sustained the economy.