Analysis: How has Brexit impacted key international economies?

This update comes after the first cloud of dust has settled following the UK’s EU referendum and provides a global view on how its effects will be felt in retail markets across Europe and key non-European countries.

The greatest effects of Britain’s vote to leave the European Union are expected to be seen in European markets, and the UK has been subject to the sharpest downward revisions.

According to Planet Retail’s latest forecasts, with GDP real growth forecasts for the UK cut by 0.4 percentage points to 1.5% this year and by a massive 3.2 percentage points to -1% in 2017, retail is in danger of contracting sharply in the face of lower consumer confidence. Sales are predicted to drop by roughly 2.5 to 3% in real terms next year.

Looking across the channel in continental Europe, export-oriented Germany was subject to the most distinct downward revision. GDP real growth forecasts have been discounted by 0.1 percentage points this year and 0.4 points for 2017.

“Because consumer confidence in Germany is among the strongest in Europe, we expect no major impact of the referendum on Germans’ desire to spend their money”

Franziska Schmidt and Tatjana Wolff

Because consumer confidence in Germany is among the strongest in Europe, we expect no major impact of the referendum on Germans’ desire to spend their money – especially as record-low interest rates hardly make saving attractive and continuously low energy prices pour additional money into consumers’ wallets.

There has also been a limited reduction of growth forecasts for Europe’s other large markets – France, Italy and Spain – for 2016 and 2017, and thus only a marginal decline in retail sales growth, which is backed by robust consumer confidence in most European markets.

Nonetheless, despite only minor adjustments to growth forecasts, structural challenges to economic development such as worryingly high unemployment rates persist, especially in Southern European markets.

Further afield

According to the latest growth projections, the US remains one of the strongest performers among developed markets and GDP real growth is forecast to be 2.2% this year and 2.5% in 2017.

Brexit will only have a marginal impact on North America since, while the EU is indeed smaller without the UK, it remains a large and attractive single market.

Consumers, whose spending accounts for two thirds of GDP in the US, continue to be cautiously optimistic amid overall weaker job creation than expected.

Like the US, the majority of emerging markets saw a negligible change to their growth forecasts as a result of the EU referendum result, and will therefore only be marginally affected.

”The Brexit referendum has almost exclusively caused a negative impact on the UK itself and the rest of the European markets, rather than having a globally significant impact.”

Franziska Schmidt and Tatjana Wolff

In China, the pace of economic development remains at a lower level than in previous decades and is boosted at present by an expansionary fiscal policy.

Planet Retail estimates that consumer spending will grow at a compound annual growth rate of almost 9% in nominal terms until 2021, fuelled by strong credit growth – although that is obviously unsustainable in the longer term.

In a nutshell, from a global perspective, the Brexit referendum has almost exclusively caused a negative impact on the UK itself and the rest of the European markets, rather than having a globally significant impact.

However, concrete consequences of the referendum for the world economy are hard to quantify and much will depend on the hard-to-predict details of impending UK-EU negotiations.

• Franziska Schmidt and Tatjana Wolff are analysts at Planet Retail