Given the recent massive decrease in the value of the pound, does this not equally devalue the British economy by a similar amount? Why does that not lead to an immediate large crash in Britain as spending power is reduced?
1 Answer
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You think spending power has been reduced, but in reality inflation has only been 1%. Meaning products inside the UK measured in pounds have only become 1% more expensive. The devaluation of the pound only exists compared to other currencies. This means two things: 1. Products from the UK have become cheaper for foreigners. So companies from the UK will sell more. 2. Consumers from the UK pay higher prices outside the country. This will also lead to more sales inside the UK. UK companies profit from a weaker pound even when measured in other currencies. Consumers on the other hand are far worse off, and if you were planning on spending your retirement abroad you can end up paying a big pricetag for it. A lower pound is good for business, not consumers, in the UK, leaving the EU is generally seen as a negative influence.
