Les effets du Brexit sur l’économie mondiale et québécoiseNovember 23, 2016

The ways Brexit affects the global and Quebec economy

On June 23, 2016, a real shock wave rocked the political and economic world. In a national referendum, the people of Britain voted in favour of leaving the European Union by 51.9%. That decision provoked active discussion amongst various experts in the media, particularly about the effects of the departure of England from the EU onto the economy.

Given the vast range of arguments for and against Brexit (a new word formed out of “Britain” and “exit”), it is quite difficult to make sense of it all. What follows is a summary of the events leading up to Brexit and its impact on the world (and Quebec) economy.

Why Brexit?

A significant part of the British population has always been opposed to their country’s membership in the European Union, since its joined the EU in 1970 following lengthy negotiations. During the last national election, Prime Minister David Cameron made a promise to hold a referendum on UK’s EU membership if he were re-elected.

The main argument in support of Brexit was that the European Union imposes limits on freedom (through excessive regulations) and economic growth. It was said that the EU means significant expenses and negative effect onto the country’s long-term stability.

How does Brexit influence the global economy?

In the short and medium term, Brexit has caused instability on the financial markets. It also caused:

  • Declining investment and an economic slowdown, especially in the construction field
  • Fall in the value of the British Pound, meaning lower purchasing power
  • Increased interest rates
  • Agitated fluctuation in the stock market
  • Loss of valuable job positions.

How will this affect the Canadian and Quebecois economy?

As you know, the global economy wasn’t doing the best to begin with. However, the tremors felt in Britain and Europe will be much weaker and noticeable in Quebec.

In the short term, it can be expected that the Quebec economy would not be influenced by Brexit. However, according to estimates, in one or two years, Quebec exports to the UK could fall if the European currencies lose their value to the Canadian dollar.

The Quebec Savings and Investment Bank, which has been investing heavily in London for several years, could see many of its investments shrink in value due to the collapse of the Pound. Besides this, the departure of England could also affect the free trade agreement negotiations between Canada and the European Union. This would be due to the new relationship between Canada and England, together with fluctuations of the British economy in the wake of Brexit.

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