Northern Ireland households will feel some gains as well as losses as the immediate impact of the Brexit vote is felt. First, the good news. Interest rates will stay low, perhaps even below than the current half a per cent base rate, as the Bank of England tries to stave off the potential economic damage from Brexit. Similarly, it seems likely that house prices will fall along with demand – which is positive for those struggling to buy their first home. It’s not so good, of course, for anyone who wants to sell their home to downsize or to emigrate following the vote.
In terms of the weekly shop, the impact is not so helpful. If sterling stays weak against other currencies, imports will become more expensive. That could lead to slight increases in the cost of food produce and more noticeable rises in the price of manufactured items imported from abroad –ranging from electrical items to cars. Oil prices are linked to the dollar, so petrol and heating oil are likely to become more expensive.
The big fear is regarding taxation. The leave campaign attacked the cost of the UK’s contributions to the EU budget – £17bn a year gross, or £8bn a year net. However, the London School of Economics expects the economy to be smaller by between 6.3% and 9.5% than if we stayed a member of the EU. Chancellor George Osborne suggested this would cut around £30bn from the Government’s tax revenues. Even allowing for campaign exaggeration, the vote is likely to lead to higher taxes and a new round of austerity cuts.
Possibly the worst affected people will be Northern Ireland’s cross-border workers. With sterling weaker than it was compared to the euro, our cross-border workers have suddenly been hit by a significant pay cut. The value of their earnings, in euros, is now less than it was before the referendum. Buying a house becomes more expensive for them – as it also does for anyone in Northern Ireland who wants a holiday or retirement home in the Republic or on the Mediterranean.
Holidays have also suddenly become more expensive. This is true for trips to the eurozone, but even more true for a vacation in Florida or New York given the fall in value of the pound against the dollar.
All this could change, though, if the markets steady themselves and the pound gains in value. But some corporations immediately responded to the vote by indicating that they are looking to withdraw from the UK to relocate to countries that will stay in the EU. This suggests that the prospects for jobs, our economy and the pound look weaker than they were before Thursday.