One expected major long-term effect of the United Kingdom's withdrawal from the European Union is broadly predicted to impact the British economy. Indeed, the British public are fully aware of the likely impact of the "Brexit" upon personal finances, households and the national economy, factors that are also mirrored by government forecasts. Yet despite warnings from many financial and economic institutions, the majority of electorates continued to vote for the UK to exit the EU in the UK referendum on EU membership.
A major argument put forward by the Leave Campaign prior to the referendum was that in the event that the UK elects to exit EU membership, it can invest its membership contributions in the domestic economy. Yet despite this suggestion, forecasts predict that the UK is destined to experience some economic decline in the foreseeable future. According to HM Treasury, the UK will continue to make contributions to the EU budget while it remains an EU Member State. The UK’s budgetary contribution was estimated to be 10 billion British pounds in 2015, around 1 percent of the total public expenditure and equivalent to 0.5 percent of GDP.
GDP is expected to drop somewhat in the years following the vote, before stabilizing and growing annually by at least 2 percent for the remainder of the period. A similar trend can be found in the forecasts for public sector net debt. In the fiscal years following the referendum it is expected that public sector debt will increase until the 2018/2019 fiscal year, at which point it's expected that such figures will stabilize and begin to decrease past pre-referendum levels. In addition the UK consumer price index (CPI) illustrates the fact that prices are expected to increase annually by at least 2 percent from 2017 until 2021.
The effect of the UK losing its EU membership is also predicted to have a substantial negative impact on the nations' output gap. The UK's output gap isn't expected to recover until 2021, meaning that the UK is predicted to fall short of its potential annual output for at least four years until it stabilizes.
Previous figures for net foreign direct investment in the UK experienced a downward trend. In light of Brexit, it's difficult to perceive how this will change in the coming years.
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