What's going on here?
Economic data was released on Friday that, for the first time, showed the impact of the Brexit vote on the UK’s economy – and it wasn’t pretty.
What does this mean?
Surveys of businesses are routinely conducted to provide a “real-time” look at how the economy is doing. Such a survey was conducted earlier this month (e.g. after the Brexit vote) and it suggested that business sentiment is even worse than expected. In fact, the result was the weakest reading since 2009 (at the height of the financial crisis / recession). Markit, the firm that conducts the survey, said that “July saw a dramatic deterioration in the economy.”
Why should I care?
For the markets: The Bank of England is likely to take action.
Although it did nothing at its most recent meeting, Britain’s central bank is expected to announce new measures aimed at stimulating the economy when it next meets (on Aug 4th). It’s likely to decrease interest rates and it might signal that it will, once again, directly buy UK government bonds. Those actions would likely be negative for the value of the pound but could help support UK stock prices.
For you personally: Brexit = economic pain (it’s just a question of how much).
Right now, the uncertainty itself is a big problem for the economy: companies are probably holding back from hiring and making big purchases. That makes it tougher for you to move jobs (or get a job) and/or get a raise. Gradually, the uncertainty will ease as negotiations get underway on an exit agreement with the EU, which will, of course, have a significant impact on the economy. But right now, many companies are just waiting to see what will happen – and that’s not good for the UK economy.