The investment firm Goldman Sachs has warned its clients that Brexit has impacted the investment finance industry worldwide, and the resulting uncertainty has cost the UK economy £600 million a week on average since 2016.
In a letter sent out to the organisation’s many clients today, the U.S. based firm warned that the current political turmoil caused by Brexit has “had real costs for the UK economy” and that the recent uncertainty around Brexit in Westminster has created a “renewed intensification of Brexit uncertainty.”
The investment firm industry works through directing flows of capital into organisations and industries through the use of investment firms, and the likelihood of investments returning reliable profits influences a large proportion of the industry’s decision-making.
This likelihood of investments providing profits can be inferred by analysts from information relating to the economy, including political, statistical, and world-economic indicators which factor heavily into the decisions made by firms when providing funding for companies.
Brexit and the resulting political turmoil has seen one of the biggest periods of uncertainty in UK economic history, leading many international investment firms to avoid funding business in not only the UK itself, but also other European countries as the full scale of the impact of Brexit on the European financial landscape has not yet been fully realised.
Analysts at Goldman Sachs predict a 15% chance of UK GDP falling by 5.5%, and the blow to confidence in UK markets would see the Great British Pound fall by up to 17%.
The economic uncertainty hasn’t just impacted the economy of the UK, as data released today has also shown that a no-deal Brexit would see the German economy, the flagship financial centre of the European Union, growing half a percentage point slower in the immediate year following a no-deal Brexit due to uncertainty in European markets.
Goldman Sachs’s top analysts also predicted that European countries could see a loss of around 1% in GDP following a no-deal Brexit due to the fallout of a sudden exit.
While still impacting the growth of the UK economy, a Brexit transition deal would lower the financial impacts of Brexit, seeing a 6% rise to the Pound and UK GDP growth increasing by 1.75% in the years following the United Kingdom’s exit from the European Union.
While this scenario would see UK GDP and the Pound increasing in value, the rate of growth would be far less than the growth experienced by a pre-Brexit UK.
The option with the lowest economic impact on UK, and world markets, would be the United Kingdom remaining the the European Union. Should the UK stay in the European Union, the investment firm predicts that the UK would see it’s economy return to the growth experienced before the 2016 vote, and would also potentially see the pound’s value increase by 10%.
The bank also alleviated concerns from other European economies around a transitional Brexit, as the bank believes that only a no-deal scenario would create implications for markets outside of the UK.