Prior to the June 2016 referendum, the UK was one of the fastest growing economies in the G7. By the end of 2018, it was the slowest. Britain, the world’s fifth-biggest economy, is preparing to leave the EU on March 29 after 45 years of membership.
The Bank of England has said that Britain faces its weakest economic growth in a decade this year as uncertainty over Brexit mounts and the global economy slows, but interest rates will eventually rise if an effective EU exit deal is agreed., The BCE (Bank of England) has slashed its 2019 economic growth forecast to 1,2 % from a previous 1.7 % and sees business investment and housing construction falling this year and a halving of the growth rate in exports. Investments in the British car industry and steel products are among the most affected, with consumers and businesses more anxious about the economic outlook due to uncertainty in relation to future trade with the European Union.
House prices, a key indicator of consumer confidence, rose by just 0.1 % in annual terms in January. Britain’s housing market began its slowdown during the Brexit referendum in June 2016 when estimated house prices nationwide were rising by around 5 % a year.
Nevertheless, Brexit does present growth opportunities for SMEs as some are opening offices in the remaining 27 countries of the EU, making it easier for them to enter new markets and access new talent pools. Countries including Ireland, France, Germany, Belgium and Luxembourg have been actively looking for opportunities to capitalize on Brexit, the Dutch government has even recently stated that it has already gained 1,900 jobs from Britain.
The number of companies relocating will grow as banks and other financial services are required to have operations in a member state if they want to serve a pan-EU market, while broadcasters who transmit across the EU need to have a license in a member state in order to meet regulations. The EU Member Governments are in talks with more than 250 companies in regards to moving their operations from the UK to the mainland before Brexit.
For BelPaese, additional potential FDI could generate a 0.4% GDP increase of 5.9 billion per year. However, the opportunities linked to the relocation of foreign companies find Italy unprepared to seize them due to structural and institutional reasons. Furthermore, Italy is less competitive in the financial services sector compared to other EU countries which claim a more strategic geographical position.
It is worth mentioning that the UK covers over 5% of Italian exports worldwide and about 40% of products are related to mechanics, vehicles and agri-food. Therefore, these sectors would be proportionally more affected, especially if Brexit happens without a final agreement.