FX.co ★ Protracted Brexit affects UK’s investment

According to experts, uncertainty related to protracted process of UK’s withdrawal from the European Union affected the country’s economy causing a significant reduction in investments.

In a note entitled “Brexit – Withdrawal Symptoms”, analysts at Goldman Sachs said that this situation would not change until the UK leaves the European Union. Experts paid special attention to the risks of steady low investments and weak labor productivity in the British economy.

Goldman Sachs noted that the side effects, such as shrinking investment, had been seen in the UK economy for a long time. Brexit has taken a toll on the country, even though it has not happened yet.

Business investment has increased by just 0.3 percent in cumulative terms since the June 2016 referendum. Last year was the first year for the UK in half a century during which business investment went down in every quarter without a recession in the economy.

Goldman Sachs predicted that low investment would lead to the worsening chronic underperformance of the UK in relation to other developed countries. Analysts warned that labor productivity would eventually decrease.

Bank experts stated that the Brexit deal requires appropriate amendments to smooth out the negative impact on the British economy. In 2020, with Brexit resolved, Goldman Sachs does expect a pick-up in the domestic economy.