The British people have spoken; it’s important that the Parliament, as well as Prime Minister Theresa May, take that seriously. I don’t think there’s any need to move immediately—they need to have a plan if they are going to go through with this. You shouldn’t just start on some sort of adventure and not know where you’re going. But they shouldn’t wait years to do this because uncertainty can be costly.
The key to the long-term impact is really going to be the policy changes within the UK as well as the relationship with the EU and the rest of the world. Britain can respond to this by dramatically changing domestic policy to make it much more business friendly. For example, former Chancellor George Osborne proposed cutting corporate taxes significantly; though Osborne has been replaced, the idea remains worth exploring. Perhaps the UK, rather than Ireland, could become the low-tax haven in Europe.
To whatever extent the UK needed to move in a more business-friendly direction, this is an opportunity for them to say, “We’ve got to do this now, because otherwise we’re going to go off a cliff.” I don’t think their economy will go off a cliff, but if that’s what it takes to get them to really reform their policies and produce higher growth, that’s going to be good for everyone across the UK, particularly for those with low incomes. If the policy makers don’t take that opportunity, I think low-income workers will be disappointed with the effects of Brexit, because immigration’s effect on the job market was not as great as many people thought it was, and because slow economic growth tends to hurt low-income people more than the wealthy.
For more from the Chicago Booth faculty on the fallout of the Brexit vote, visit our collection here.