Britain’s exit from the European Union (EU), or ‘Brexit,’ as it is popularly called, has raised a number of questions regarding potential after-effects. The impact of this decision on global investment is something that economists and investors around the world are working hard to decipher and understand. The entire process of the UK leaving the EU will take approximately 2 years; here we offer a brief summary on the possible consequences of Brexit on the world economy.
The good news is that, as dreadful as Britain’s “leave” decision might sound, its impact on global investment and growth is going to be minimal. In fact, fears of the global economy plunging into recession have turned out to be baseless. At most (yet still a remote possibility) what can happen is that the global GDP (gross domestic product) might decrease due to the low demand of UK imports.
At the same time, one cannot deny the fact that the investment environment has been dampened due to the sheer unpredictability of the spill out of Brexit as well as the tightening of financial conditions around the globe. It is for this reason that the role of central banks has become even more critical. Most central banks are slashing their interest rates in order to contain the aftermath of Brexit, sending out a clear message to businesses to delay their investment projects.
Quick EU Facts
When it comes to global venture capital investment, the market stood at $128.7 billion in 2015. According to analysts at Technavio, the market is expected to grow at a CAGR of over 35% by 2020. As the exit of Britain from the EU materializes, there is a good chance that this figure could change a bit. However, the overall picture seems to be congenial for venture capitalists globally. With the growth of internet-based business ecosystems, backed by heavy investment in digital coins, this is one market that is geared towards growth and expansion. London has often been regarded as the digital capital of Europe, and with its prime environment, venture capitalism is sure to see positive growth.
As far as the long-term effects of Brexit, much depends on the policy decisions of Britain and other European countries. Until then, economies all over the world are sure to take calculated steps when it comes to investment in various sectors.
View the 2016-2020 Global Venture Capital Investment Market Report
