Let’s first remember how everything began.
First, David Cameron announced that a Conservative government would hold a referendum on leaving the EU, if elected in 2015. On 7 May 2015, they unexpectedly won the general election with a majority.
In a speech to the House of Commons on 22 February 2016, Cameron announced a referendum date of 23 June 2016.
In a referendum on 23 June 2016, 51.9% of the participating UK electorate (the turnout was 72.2%) voted to leave the EU.
Now, check the Pound to Euro exchange rate and how it perfectly reflected all events.
On 23 June 2016, the pound increased value for 0.35% in anticipation of the results, and then, immediately, on 24 June 2016, it lost 5.82% of its value, which is historically the biggest fall in one day.
So, let’s calculate how this stacks up with one of the loudest propaganda claims: that the UK was sending £350 million each week to the EU.
For now, we will completely ignore the fact that the EU was sending great portions of that money back.
If we calculate the average Pound-Euro exchange rate from 23 June 2016 to 10 November 2017, we will get an average exchange rate of 1.1525. If we do the same for an equal number of days before the referendum from 23 June 2016 to 3 Feb 2015, we will get a rate of 1.3509. If we weigh in the average exchange rate from 1 January 2008 (before the economic crisis) all the way to the Brexit referendum, we will get an average exchange rate of 1.2202. *1
In the first case, we are worse off by 0.1984; in the second, 0.0677.
Also, keep in mind that the Euro was adopted on January 1, 1999. Since that adoption, until January 1, 2008, the value never fell below 1.35, while at one point, on 3rd May 2000, it jumped to an all-time high with an exchange rate of 1.752!
If we take the amount the UK was sending to the EU £350 million ($408 million) each week, we can simply calculate that on annual level that is £18.2 billion ($23.84 billion).
Since the referendum, 505 days have passed, let's calculate how much we lose.
In 2016, the United Kingdom’s nominal GDP was $2.629 trillion, the 9th largest economy in the world, with $41,995 per capita. Dividing by 365 days in a year, we can roughly calculate that the GDP for the period of 505 days was roughly $3.63 trillion or £2.77 trillion.
Now, let’s roughly calculate losses only on the exchange rate, without considering losses in trade and bad Brexit deals.
For the first case:
- £2.77 trillion * 0.0677 (avg. exchange rate difference) = €187.53 billion for 505 days
(€187.53 billion / 1.1525 (eur2gbp)) / (505/7) = £2.25 billion a week
And for the second case:
- £2.77 trillion * 0.1983 (avg. exchange rate difference) = €549.56 billion for 505 days
(€549.56 billion / 1.1525 (eur2gbp)) / (505/7) = £6.6 billion a week
Now, think: how does the £350 million each week compares to the loss of £6 billion a week?
How does it compare when you know that this £350 million was not really £350 million but actually £161 million a week?
We can argue that only export and import matters. Going that route we can find that last year (Jun 2016 to May 2017) Figure 4 combined import/export was £1.186 trillion. By further calculating we can find loss of £3.92 billion a week for the rate difference of 0.1983 and £1.34 billion a week for the rate difference of 0.0677. Undoubtedly this shows that even if we consider just import/export trade figures — loss is almost 8 times (1.34bn/161m) higher than infamous amount we were losing before the Brexit.
Anyway, I hope this was informative.
So, until the next time, while the UK continues losing money at the rate of ~£6 billion each week only on the exchange rate.