European Policy Analysis
uncertainty but so far has not generated a huge economic fallout — this will only happen when eventually Brexit is under way . The outcome of the referendum caused a sharp fall in the exchange rate of the British Pound , and thus created the kind of exchange rate shield that countries with their own currencies can enjoy . It is doubtful , though , that the current exchange rate already reflects all the concerns of economic actors . A further fall is to be expected when the negotiations with the EU start . The fall of the exchange rate indicates worries of economic actors , and this is becoming relevant when it comes inferior productivity performances over the last couple of years , but then the UK did worst , if we take deflationary Japan out of the picture . This loss of international competitiveness reflects deep-seated changes in the modalities of British capitalism and its version of financialization . Moreover , the current account deficit is not a one-time event but a structural feature of the British economy . There are quite a number of countries that can live easily with current account deficits , most prominently the US that enjoys the advantages of the dollar being the leading global currency . The British
to the British current account .
In 2015 the UK came up with the largest current account deficit share among all G-7 economies , and as the graph shows this deficit is not only due to deficits in the primary income balance but mainly due to deficits in the trade balance . The latter can be seen as the outcome of a deteriorating international competitiveness that has its roots in the stagnation of labor productivity . As a matter of fact , all G-7 economies showed pound , on the other hand , is a second-tier currency , and as a result it is up to the economic promises of British capitalism that international investors see the UK as a profitable regime that is worthy of receiving capital inflows . Arguably , leaving the common market may question future profitability of British capitalism .
Against this background the simplistic optimism of the leave camp that the UK will become a blooming and prospering economy when it is freed from
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