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Back in late April I wrote an article about the main arguments being put forward by remain and leave campaigns leading up to the EU referendum on 23 June 2016. Since then we’ve had the vote, the UK has decided we should leave the EU and a frenzy of action, discussion and debate has ensued. I don’t think it’s an understatement to say that this was one of the most momentous events the UK has seen for many years, not least because it was not the outcome most commentators and polls were suggesting.
On the morning after the vote we saw the resignation of our Prime Minister and the start of a process to find a new leader. Many will have been surprised to see an early announcement from Boris Johnston that he would not stand as a candidate and many see Michael Gove as his “assassin” in that respect. Theresa May is now preparing to take over from David Cameron and despite having been in favour of remaining in the EU, she has pledged not to try and get us back into EU, a dedicated Brexit department to negotiate the best possible exit terms and no early general election or emergency budget. On the face of it, all those things seem sensible on the basis that it respects the vote and gives a sense of calm, but nobody can guarantee that further economic consequences of leaving will not force a different path. It will be an extremely tough task for her as she takes the lead.
The country needs a strong opposition at the best of times, never mind at a time of great uncertainty. Labour leader Jeremy Corbyn has re-iterated that he has no intention to resign, despite all the resignations from the shadow cabinet and talk of fears that the party may even split. Many of the party’s MP’s are calling for him to resign but it seems the membership may still back him. In fact, it’s thought that a post Brexit surge in new Labour members is those joining to help keep him in post.
Whatever your political persuasion, it’s clearly in the country’s best interests for us to have all party leaders and cabinets in shape as soon as possible in order for us to pull together and manage the change.
Deciding who gets to lead the exit is the easy part. How it is achieved is the difficult part. Some in the EU want us to trigger Article 50 now, hoping not to encourage other member countries to do the same. Some, like Germany, have not pushed for it to be invoked immediately and won’t start negotiations until it is. When Article 50 is invoked a two year window (possibly even longer) will be opened and the process of negotiating the terms of the exit and trade deals will commence. During the negotiations the UK would continue to participate in the EU but would not take part or vote in any European Council discussions concerning its exit.
It was said that the initial shock of Brexit wiped $2 Trillion off world markets and the pound hit a 31 year low. However, even by the end of the Friday after the vote, the markets had started to recover and the FTSE 100 has since exceeded its pre-Brexit level. The pound has continued to fall as markets express concern about Brexit and some commercial property funds have suspended trading. Despite the pick up in the FTSE 100, housebuilders and bank stocks have seen big falls.
The falling pound will clearly concern importers and could see retail prices increasing in the not too distant future. Those with an eye on the upcoming summer holidays who decided to wait until post Brexit to get their holiday money will also lose out. It remains to be seen where the pound may settle, but the last few days have seen further slumps. On the flip side, the domestic tourism industry could see a boost as the low pound draws more people from overseas and may encourage more UK residents to holiday in the UK.
The falling pound is good news for exporters as their products become cheaper for foreign customers. However, even those exporters benefiting from this will be keen to see less uncertainty.
It is clearly very difficult to predict where things may settle until government leadership is resolved and EU exit begins. We may even see a general election in the coming months before we embark on the exit. If it does, we could see someone elected who has completely different ideas on how to deal with Brexit. What is clear however is that we need a strong leader with a clear plan to help stabilise the economy and bring confidence to our businesses and investors. In the short term we may see some further shocks in currency, the stock and property markets and the outlook for growth in the economy, and maybe even an interest rate cut. For the long term benefit, we should try to remain as calm and positive as possible about our ability to deal with it. Whatever your opinion on the outlook, we still have the world class skills, businesses and offering in the UK to enable us to cope with whatever is thrown at us.
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