Since the Brexit referendum on June 23, 2016, the U.K. has faced considerable economic challenges, with estimates suggesting a GDP reduction of 6-8% by 2025 due to factors like uncertainty and resource misallocation, according to Stanford professor Nicholas Bloom.
The promise of regaining control over immigration has led to net emigration from EU countries, while migration from non-EU states has increased, driven by labor shortages and emergency visa schemes. The value of the pound has remained approximately 10% lower than its pre-referendum levels, affecting the cost of living for U.K. citizens who rely heavily on imports.
The divergence in performance between the FTSE 100 and FTSE 250 reflects broader market sentiments, with the FTSE 100 benefiting from global revenue exposure while the FTSE 250 struggles with domestic challenges. Overall, the U.K. stock market has not kept pace with U.S. markets, indicating a stagnant economic environment.
The EU continues to be the U.K.'s largest trading partner, accounting for a significant portion of imports and exports, despite the new trade deal established post-Brexit. Political instability is also evident, with no prime minister serving longer than three years since the referendum, culminating in the recent resignation of Prime Minister Keir Starmer amid leadership challenges