Whilst many people were hoping for a different result, the votes have been counted and Britain will be leaving the EU. I believe it will now be important for us to focus on the long-term implications of our exit rather than getting too caught up with the short-term market corrections and furore in the press.
Ultimately, the UK is still one of the strongest economies in the world regardless of EU membership and the fundamentals underlying that fact have not changed overnight. Therefore, the short-term ‘crash’ (if you can even call it that) in markets is simply a reaction to the unexpected outcome of the vote. The press have been quick to highlight a fall to historic lows of the £ vs $ and the large dip of the FTSE 100, however, both are currently trading at levels similar to those experienced at the start of this year and we are not expecting anything close to the true market crash experienced in 2008/09. That being said, some degree of market volatility is sure to follow the rocky road of the exit process over the coming years.
The positives to come from Brexit are that perhaps we will see a stronger UK in the long run as the Brexit campaigners promised. This will depend on the terms of any trade agreements that can be negotiated with the EU and other global partners which will also be driven by who is placed in charge of these discussions now the David Cameron has stepped aside. We still have a strong position in the global economy and the majority of the leave campaigners have been keen to stress that we will not become an inward looking ‘Little Britain’, but will simply be taking control of HOW we do business with other nations. Hopefully this is true and we can benefit from the greater freedoms afforded to us.
The process of leaving is likely to be a long one, particularly when we look at the example of Greenland when they exited the EU after gaining independence from Denmark. Despite them only having one major issue to negotiate (fishing) and a population roughly the size of Macclesfield, this process took nearly two and half years, and we can expect the UK negotiations to take a comparably long time to conclude. So despite the vote being behind us, the road ahead will be lengthy and there are many obstacles to overcome on the way. First and foremost it will be interesting to see how Scotland and Northern Ireland are handled, having both voted overwhelmingly in support of remaining within the EU.
Again, our primary message to clients is simply to sit tight and not get caught up in the noise coming from the press over the short term as any financial decisions taken before the dust has settled could be costly.