Why a Brexit Crisis is Not a Bust

by Carmen Elena Dorobăț

A recent survey of UK firms conducted by Deloitte has revealed that the referendum decision to leave the EU has battered business confidence, as “82 percent of chief financial officers from FTSE 350 and large private companies expect to cut capital spending in the next year, the biggest proportion on record.” The accountancy firm’s warnings of the expected economic downturn have reignited the push for further interest rate cuts. The Bank of England—although its own monthly report rather contradicts the findings of the Deloitte survey—is now nevertheless preparing for a “material easing of policy… [in August] to help cushion the expected slowdown.” It is not surprising that central banks would jump on any opportunity to further extend their mandate and play the role of market maker of first resort, intervening into the market at the slightest sign of trouble. But in this particular case, the BoE would be responding to an event that, in itself, could never bring about a business cycle.

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