short run due to the depreciation of the pound which is seen as a key indicator of the performance of an economy. In the long run, investors may also be scared away from buying property in the UK as a result of perceived decreases in potential demand from a reduction in the number of immigrants coming to the UK in the future. Also, the fact that among academics, notably 10 Economics Nobel Prize winners including James Heckman in an open letter to the Guardian newspaper, there is a general consensus that the UK leaving the EU will damage our economy meaning there will likely be a decrease in investment into the UK house building projects. The decrease in the investment in home building would cause very large increases in unemployment as the construction industry accounts for 6.2% of the UK’s workforce (2.1 million jobs). This would not only drive homebuilders, such as Persimmon, into turmoil but also reduce the demand for products in interrelated markets such as concretes and large machinery industries causing further increases in unemployment. This would spell disaster for the UK economy because it is a consumer based economy and unemployment would, in theory, increase resulting in a massive decrease in the Gross National Product of our economy. When this effect is paired with the increased social welfare payments on benefits that the government will face, malign deflation may be caused that is akin to that experienced in 2007-8 globally. However, this would be especially damaging as a result of this being localized to the UK only, unlike the previous financial crisis, and, therefore, relative to the rest of the world the UK would be hugely impacted. Thus the UK could not implement any quantitative easing, which helped greatly in the global recession, as the increased money supply would not be diluted throughout the global economy. To add to this, the fact that there will be increases in the cost of mortgages will result in decreased domestic demand in the housing markets with house prices forecast to fall by as much as 18% 8 by the Treasury, despite Mark Carney’s assurances of the Bank of England being prepared and having contingency plans in place. This would be especially magnified in London as a result of it being a hub for foreign investment and would likely experience the largest decrease. So, to conclude, the negative effects of the EU referendum would stretch far and wide throughout the British economy in both the short and the long term. This will cause problems such as a reduction in investment in our economy and a large increase in the unemployment rate. However, all of this would be subject to exactly how much confidence is lost by investors in the economy and its ability to grow in the future, which is, as we know, nowhere near as quantifiable as simply an exchange rate or a stock price.
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8 http://www.express.co.uk/finance/city/683140/Brexit-what-will-happen-to-house-prices-when-Britain-leaves-EU-referendum-2016- property
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