It gives me no pleasure to say this but Brexit is going to be extremely costly to the UK economy over the next 3 to 4 years. The effects of the Brexit vote are immediate. There is the increase in uncertainty and decline in both consumer and business confidence. This will mean lower investment, lower foreign direct investment, less job offers and a rise in unemployment. There will also be a big hit to what economists call "discretionary consumer expenditure" that is big ticket items like cars, holidays, purchases of white goods etc. There has also been a big hit to the commercial and residential property market firstly in the way of reduced volumes and later we should expect big price falls especially in London where prices are absurdly high anyway. The only offsetting thing is the rapid depreciation of sterling which will to some extent boost exports.

The other reason to worry is the scope for a policy response is quite limited a cut in base rate from 0.5% to 0.25% is peanuts and unlikely to do much. Further Quantitative Easing is likely but is pretty much a useless and actually destructive policy. Then the scope for fiscal expansion in the way of tax cuts and increased government expenditure is limited as the fiscal deficit is too big and likely to deteriorate significantly because of a prolonged Brexit induced recession. The recently published fall in the flash Purchasing Managers Index to well below 50 with a reading of 47.7  which indicates economic contraction is an early warning sign that things will be much worse than the 1% of economic growth predicted recently by the IMF. I am afraid that Britain will face a nasty and prolonged Brexit induced recession especially once Article 50 is actually invoked and the hard task of getting a new trade deal and relationships with the rest of the world starts. There is a lot worse to come.

The UK has some rather urgent trade talks ahead once it invokes Article 50 which will set a 2 year time limit for the UK to exit the EU. The major problems are that trade talks are extremely complex and normally take years to negotiate. By the way we don't have enough trade negotiators to do all this as we have not done trade talks for 43 years as this has been done on our behalf by the EU. As the head of the WTO Roberto Azevêdo has warned in the Financial Times

“It is extremely difficult and complex to negotiate these trade agreements. And slow as well,” he said. “Even if you are in a position to negotiate quickly with all these other members it doesn’t mean that they will be in a position to negotiate with you because they have their own priorities."

Also the UK clarify its new UK-EU status with the WTO which requires the consent of all the existing WTO members such as Russia and China. It will also be virtually impossible for the UK to do any trade deals with countries such as Canada, United States, India and China before it has established its new trading relations with the European Union. The reason for this is that access to the Single Market would mean the UK needs to apply the EU Common External Tariffs (CET) to rest of the the world. For example if the EU has a CET on steel imports from the US and rest of the world, then if the UK remains in the Single Market it will have to apply the 20% CET on the US as well and cannot have free trade in steel and other products with other countries such as the US, India and China.

There is also the question of agricultural support, UK farmers currently get subsidised by the Common Agricultural Policy if we wish to continue agricultural support post EU then this will require WTO approval. A very important point that is overlooked is that if the UK-EU strike a free trade deal then in order to get WTO approval it needs to cover "substantially all trade" which means services as well. But to get continued open trade in services then the UK will have to accept free movement of labour something which is an anathema to Brexiteers.

Then there is the issue of UK trade relations with other countries that the EU has special deals with. Since we will not be EU members we will need to renogotiate all these deals ! An exit from the EU will mean the UK loses preferential access to other markets covered by 36 trade agreements with 58 countries negotiated by the EU. In order to remain compliant with WTO rules the UK would have to impose higher “most favoured nation” tariffs on imports from those 58 countries, and they will to levy their own surcharges on British exports.

These are just some of the many complex issues the UK will be dealing with when it comes to trade over the next decade. The exit costs of leaving the European Union were completely ignored by the Brexiteers but will become very apparent I promise you that. Oh and Michael Gove does not like listening to experts by the way...

Looks like the European Union might start to play hardball over trade talks with the UK which may delay the idea of invoking article 50. In a statement the EU Trade Commissioner Cecilia Malmstrom has made it clear that there will be no trade talks until the UK has completed it's Brexit. The plain fact is trade deals are enormously complex things and the UK does not have any well trained trade negotiators as we long ago delegated this responsibility to the European Union that negotiates for all its member states vis a vis the rest of the world. The Brixiteers were clueless about these kind of issues:

http://www.bbc.co.uk/news/uk-politics-eu-referendum-36678222

"Under EU law, the bloc cannot negotiate a separate trade deal with one of its own members, hence the commissioner's insistence that the UK must first leave."

"It is also against EU law for a member to negotiate its own trade deals with outsiders, which means the UK cannot start doing this until after it has left the EU."

"There are actually two negotiations. First you exit, and then you negotiate the new relationship, whatever that is"

This latter point is very crucial since the UK cannot really be in a position to talk to non EU countries until it knows whether or not it will have access to the single market. If you have access to the single market then you have to apply the EU common external tariffs to other non EU countries there is no freedom to do free trade deals with them end of story.

In addition, there is the distinct possibility that if we have no trade deal with the EU in place within 2 years of invoking article 50 that the EU will be forced to treat the UK as a third country in line with it's obligations under the World Trade Organisation rules. That will mean applying the same tariff to the UK as it does to the US, Japan and China a potential disaster for UK exporters. It would also mean no European passport for UK services (currently UK services firms can sell services into the EU market without the need for EU permission) -  for a service sector economy like the UK that would be extremely damaging.

What a fine mess the UK has got itself into!

Boris Johnson is probably the worst politician in Britain in the last 40 years. He was probably for remain but opted for leave in a last minute switch LINK1   . He then gave some degree of respectability to Nigel Farage's UKIP by acting as a fig leaf for their otherwise fairly racist campaign. He told one lie after another in the campaign and somehow won when he really hoped to lose. Having then caused the biggest crisis for the UK and European Union in the last 40 years he then backs down from the task of trying to clear up the mess and havoc that he has contributed to creating. He is not fit for office of any kind, millions of people will suffer for years to come because of this buffoon. Michael Hesseltine has delivered his devastating verdict in the video below.