Real estates prices in Britain may collapse by 25% and GBP to depreciate by 35% in case of Brexit, according to Fitch forecasts. Also the social tensions threaten to boil even if decided to stay in the country in the bloc. The rating agency warned that the eventual exit, accompanied by difficult and lengthy trade negotiations, will disturb the market and risked causing permanent damage to the British financial sector. In a possible Brexit, the value of the national currency will collapse by 30% until the end of 2016 against a basket of other currencies, pushing the retail sector to an unprecedented financial crisis at levels on 2008 and striking British landlords because of the tightening of migration.
Fitch warned that the vote in favor of keeping the country in the bloc will also lead to unrest and the wave of migration will remain high in the coming years.
The opposite scenario according to the agency will move the “center of gravity of the EU” to more protectionist and less liberal economic policy. The report describes the choices of leaving a dangerous precedent that threatens to weaken the unity of the whole block.
Agency warns further that negotiations between the EU and Britain after the vote for Brexit may affect growth to devalue the pound and push up inflation. Fitch predicted that the central bank may be forced to increase interest rates to above 3% until 2019 after a period of looser monetary policy to offset the big drop in demand. A weaker economic growth and higher interest rates may cause a sharp fall in house prices.
Landlords in the UK will also be affected by the reduction of migration, which can drop to near zero levels. Official statistics show that migrants are three times more likely to rent a home than British. With regard to currency risks rating agency stated that exporters will benefit from the devaluation of the pound, but airlines for example, will suffer significant negative effect, since over 40% of their costs are in dollars, and a huge part of their debt is also mostly in the green currency.