Brexit – What’s new?

We are a couple of months on from the Brexit vote, the dust has settled a little, so what do we know?

 

  • There was a great deal of uncertainty in the run up and immediate aftermath of the vote
  • In the very short term this will have arrested economic growth in July
  • Indications are that economic growth just before the vote was higher than expected
  • The Bank of England has responded to the vote by cutting interest rates
  • We have a new Government

So what has been happening to the markets?

 

  • The value of the £ fell sharply after the vote, recovered a little and has settled at a stable but lower rate.  Euros and dollars are more expensive.
  • Shares in companies that would be hit by a UK recession fell very sharply (up to 40%) after the vote.  In the last few weeks they have been recovering strongly.

What does this mean?

 

  • The lower exchange rate will help our exporters and our manufacturers
  • There definitely was a shock to the economy in July
  • All the indications are that we are quickly reverting to business as usual.  Personally I am very hopeful that an immediate recession will be avoided.

Will we leave the EU?

 

I have seen it argued that we won’t leave the EU.  I think we will, and for political reasons.  It is my view that if Teresa May does not exit the EU, the Conservative Party will destroy itself in an internal war that will make the Labour Party look like comrades!  And she knows this.  I also think she will want to go into the next election with the deal done. My judgement is that to go into the election without a deal will be too high risk.  My view is that we will leave the EU sometime in 2019.

 

How will leaving the EU affect us?

 

Well that’s the big one. And really hard to answer. It depends on the deal the government comes up with.  Just now the UK government and the EU seem to have irreconcilable positions.  We will see.  It is hugely in the interests of both parties to have a grown up deal.  Normally, but not always, that is a good starting point for a deal.

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