Since implementation in 2016, Brexit has left the UK in a tremendous state of uncertainty. With nearly half of the of the citizen population riddled with upset—51.9% in advocacy and 49.1% in opposition—the UK has become a controversial battle ground, and many feel that the decision was arrogant, irresponsible, and dangerous. Besides the obvious turmoil conclusive to a nation dividing—politically and publicly—Brexit has presented challenges for the Private Equity (PE) sector. PE in Britain will not be the only one who faces difficult challenges, as the nation’s disconnection will pose threats to all of Europe, and the entire global market.
Amidst the murky fog of uncertainty—a danger in itself—that Brexit has encapsulated PE in, one common deficiency immediately arises. The trade within the EU between other countries and the UK has become a vital part of economic growth in both Britain, and the nation’s former counterparts. Neil MacDougall spoke with Private Equity Insights Ltd about the immediate devaluation of sterling, which has erupted scepticism among various EU businesses. MacDougall pointed out that with this devaluation, it is inevitable that EU businesses will have to re-evaluate prices when trading with Britain; if they wish to satisfy margins. The latter concludes in a stale mate situation, throwing a wrench in an economic wheel that has been lucratively spinning for years. Gerard Cohen, a private banking expert from Monaco with nearly 40 years of experience, confirmed MacDougall’s premonition.
“Britain has come to an unwise conclusion,” said Cohen, “and we have not even begun to see the effects that this decision has made; everyone is left in waiting, leveraging towards the decision to disconnect business ties from the UK—just as they have disconnected from the EU.” Another business giant in Monaco, co-president of Teneo Intelligence, Kevin Kajiwara, told Financial Times that PE—specifically family businesses—will not see significant issues arise until 2018. In the meantime, all anyone can do is try to remain optimistic while the consequences of Brexit hide in the future, waiting for the inevitable pounce on the EU region.
Larger members of the Eurozone, particularly Italy and Germany, have already began to feel the pressure from Britain’s disconnection. However, Brexit is not just economically stirring up the EU, but the global market altogether—as reported by Forbes. Currency in the US and Japan will go up. For the US, this means that threatening complications will arise with their trade with EU—two of the largest market exporters—thus, putting strain on the US’s export market. The rise of the USD will affect the yuan in China, conclusively bringing its value down. For Japan, their work to re-inflate their economy after years of deflation has become compromised. The recklessness of Brexit has not just left Britain and the EU countries in a state of uncertainty, but it has begun tampering with the entire globe’s economy. The future is going to be challenging.
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