Despite market turmoil, analysts say a liberal Brexit could be a boon for UK economy
The financial markets have over-reacted to the UK's vote to leave the EU because those buying-and-selling cannot remember the positive effect of leaving the Exchange Rate Mechanism (ERM) in 1992, an asset manager has said.
In an upbeat outlook on how well the UK can perform now it has begun the process of severing ties with the EU, Savvas Savouri, chief economist at Toscafund, called on markets and commentators to dismiss "alarmist" talk that the UK will enter a recession and highlighted the many opportunities the UK now has.
Toscafund believes the devaluation of the pound will be a positive for the economy and looks at what happened after Black Wednesday on 1992, when a cheaper pound helped exports while inflation did not surge beyond the control of the Bank of England.
Savouri acknowledges his prediction of GDP growth of around 1.8 – 2.2 per cent in 2017 puts him at odds with most of the economic community.
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A poll of economists for Bloomberg this morning, for instance, found three-quarters expect the UK to fall into a recession at some point in the next 18 months.
However, a separate report from BMI Research – a subsidiary of Fitch Group, which also owns the ratings agency – also argued leaving the EU could be a net positive for the UK economy, but it was dependent on securing good terms of exit and adopting the right policy mix. It said the economic opportunity of Brexit has been "unappreciated".
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Stuart Allsopp at BMI said: "Outside the EU, the UK will have an opportunity to embrace more market-friendly policies, while increasing cooperation with more dynamic economies outside Europe.
"The UK has one of the most attractive business environments in the EU and indeed the world, and this will remain the case. Amid the doom and gloom surrounding the UK's economic prospects of going it alone, we highlight that from a medium term perspective, the decision could work out to be a net positive."
The call for Britain to choose the "liberal Brexit" route comes as European leaders hold a meeting in Brussels to discuss their response to the UK's vote to Leave, as wrangling at home over the best way out of Europe heats up and with both the Conservative and Labour parties embroiled in leadership contests.