so, importing raw materials can be cheaper with small tax and UK exports will be favoured in those partner countries. Hence, the possible loss of volume of exports in the EU can be countered. Depreciation in the pound does not mean the UK will perish. One of every 10 tourists in the UK comes from the US and two from Asia. A cheaper pound would encourage more inward tourism meaning more inflow of money. And, because the other currencies become more expensive, British people would be less likely to have holidays outside the country meaning less outflow of money. It is beneficial. However, depreciation won’t affect tourism as much as we suggested. If the business expands between the Asia and US, more and more people will be tied around the UK and this will eventually increase mass tourism. One of the solutions can be diffusing the service of financial centre into the US and Asia markets. Asian Infrastructure Investment Bank can be a great platform to do so and the UK is able to possess a seat at the ‘table’. The Asian market has a larger potential than the EU, so it is important to be economically diverse and dynamic. Overall, it will be very exciting to see the positive changes. There are risks in the storm, together with lots of opportunities. On 23 rd June 2016, millions of British citizens headed out to have their say in the European Union Referendum; a vote on whether the United Kingdom should either remain in the EU or whether it should leave it. The result announced the next day detailed that Remain held 48.1% of the votes, while the Leave campaign, headed by conservative politician and former Mayor of London Boris Johnson, managed to gather the remaining 51.9% of the 33,551,983 people that voted. This result had large scale impacts throughout the domestic and international financial markets with the value of the Pound Sterling against the US Dollar depreciating by over 10% from the date of the referendum to the date of writing. The FTSE 100 also declined by the largest amount since the global financial crash of 2007-8 with some members falling by as much as 37%, as was the case with homebuilder Persimmon, in that same period of time. This evidently shows a huge decrease in investor confidence in the British economy. Furthermore, this quitting of the EU would cause even more damage both to the global and local economy. One way in which the UK economy could be damaged further is via a phenomena known as hot money outflows. Hot money refers to capital which continuously flows between financial institutions in different economies in an attempt to capitalize on increased interest rates in these economies and this capital is usually owned by investors. This, given that the value of the GBP has decreased and hence the Pound is worth less in terms of other currencies, will result in the real value of capital deposits in the UK decreasing greatly. This is especially true when considering the fact that the UK has a very low interest rate of only 0.5%, meaning a low return on investors storing capital in the country. Therefore, investors will instead store their capital in institutions in other countries which have higher interest rates in order to maximize their profits. This, paired with the fact that the main reasons for the UK being used as a store of capital deposits previously were its very stable economy, high investor confidence in the UK and its valuable currency, all of which have been severely damaged by the decision to leave the EU (at the very least for the time being), means that hot money will flow out of the economy at an increasing rate. Another way in which the UK economy may be impacted for the worse is due to falling house prices. This fall in house prices would initially be triggered by a loss in confidence of investors in the state of the UK economy in the __________________________________________________________________________________________ The impact of the EU referendum: housing, investment, and ‘hot money’ E NRI S OPOTI & T OMMY C HEN
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