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The economic effects of Britain’s decision to leave the EU

A year is a long time for financial markets

By THE DATA TEAM

THE British vote to leave the EU on June 23rd last year came as a surprise to financial markets. Most investors expected that the Remain camp would prevail. As soon as the first results were in, they dumped their holdings of sterling, which fell sharply against both the dollar and the euro. A weaker pound is, in essence, a sign that international investors are less keen to buy British assets and need to be enticed by a lower price. The result has helped British exporters, but has also pushed up inflation and squeezed real wages as imported goods became more expensive. That may explain why the British economy, which performed well in the second half of 2016, has recently shown signs of slowing.

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