Brexit roundup

The prospects for the City of London

Barry Eichengreen explains how “equivalence arrangements” – the requirement that UK banks  provide to customers in the EU only products covered by regulations that are “equivalent” between the EU and UK – will seriously limit the City’s international financial preeminence.
A Survival Kit for the City of London
By: Barry Eichengreen – Berkeley

Decrease in FDI projects

Uncertainty about which kind of Brexit the UK would choose has mainly affected investment. In the chart below the Bank of England show how business investment has flatlined since the referendum, when the evidence from previous recoveries suggest it should have shown strong growth. In addition the number of foreign direct investment projects coming to the UK, which was on a rising trend until 2015, has been falling since the 2015 election when it became clear there would be a referendum.

The economic cost of the Brexit decision that Leaver voters do not get to see
By: Simon Wren-Lewis – Oxford University

Decrease in syndicated loans

Breinlich and al. use data for all syndicated loans issued by private and public companies in all available countries during the period 2000 to 2017, and  find that issuance in the UK syndicated loan market dropped by 23% after the Brexit vote, relative to a set of comparable syndicated loan markets. They also document a strong decrease in the issuance of British pound denominated loans, after the Brexit vote, for the same firm-bank combinations who switched into alternative currencies such as the US Dollar and the Euro.
The Consequences of the Brexit Vote for UK Inflation and Living Standards: First Evidence
Authors: Holger Breinlich, Elsa Leromain, Dennis Novy, Thomas Sampson
From: University of Nottingham, London School of Economics, University of Warwick

Increase in inflation

Saunders and al. find that the referendum increased aggregate UK inflation by 1.7 percentage points within one year. This increase in inflation is evenly shared across the income distribution, but not across regions. London is the least affected region, while Scotland, Wales and Northern Ireland are hardest hit.

”BREXIT” and the Contraction of Syndicated Lending
Authors: Anthony Saunders, Larissa Schaefer, Sascha Steffen, Tobias Berg
From: New York University, Frankfurt School of Finance & Management