- Markets were unprepared for “Brexit” and were positioned the wrong way. Voting for “Bremain” was seen as firming just prior to the opening of polls resulting in sharp rallies in sterling and share markets. When Brexit started to become a reality, huge market volatility has resulted. Equity markets were pummelled and the UK currency fell sharply, although only marginally below the level it was at in February 2016).
- The Brexit vote was non-binding although it is difficult to see the UK parliament going against the wishes of the people and not enacting it.
- Article 50 of the Lisbon Treaty, allowing exit from the EU, may not be triggered for some time. Once triggered the UK has 2 years to complete the exit.
- There is UK political uncertainty with David Cameron having resigned with the intention of leaving by October. There is a move to unseat the Labour opposition leader, Jeremy Corbyn with 11 of his shadow ministers resigning because of a lack of confidence in him. Northern Ireland and Scotland voted to remain in the EU and in what is being perceived as a political leadership vacuum may try to agitate for their own separation from the UK and inclusion in the EU.
- There are apparent schisms across the UK which have been revealed in the Brexit vote between Londoners and the country, between the North and South, between rich and poor, between old and young and between the educated and less-educated. This may take a considerable time to play out.
- The EU will not want to make Brexit easy for the UK lest it leads to others such as the Netherlands and Sweden choosing to leave. Nonetheless, the UK is the world’s 5th largest economy and the 2nd largest in the EU; the reality is that trade will continue. The UK will become free to conduct trade with the rest of the world including the US and Australia.
27 June 2016