Brexit – Expected Short-term Impacts – Gérard Cohen

 

It’s been just a week since Theresa May activated Article 50 and officially indicated the UK’s intent to leave the EU.  This comes a whole nine months after the referendum in which UK citizens voted 51.9% to 48.1% to leave the EU. Beyond the immediate exchange fluctuations that took place at the time, with the Pound losing out to most major markets, little has changed between the EU and UK.

Article 50 is the trigger for a two-year planning period for the UK to leave the EU.  This permits enough time for both sides to figure out the details of how things are going to work going forward, and is considered the negotiation period.

While the weakening of the Pound since June last year has seen a decrease in local spending, it has provided a good environment for exports, with profits in the sector increasing. This is expected to continue for the next two years, and could be considered an important factor for local investment.

The weakened Pound has also proved a positive for tourism, with the UK Office for National Statistics reporting an increase of almost 20% in the number of people who visited the UK on vacation in January, which provided a 15% increase in spending along with it.

The recent Article 50 announcement may have concerned some who were hopeful of a turn-around, but it wasn’t a surprise when it was made. As such markets have been fairly stable in its wake, and most London investors are fairly confident for the short-term outcomes.

From a legal perspective, a great repeal bill is expected to pass through UK parliament in May this year. It would repeal the European Communities Act of 1972, and reinstate UK Laws which used to cover the same topics. This is to ensure that a smooth transition occurs at a later stage.

Much is still to be determined, but forefront of most people’s minds seems to be concern for people who have made their homes in other nations. To that end an EU meeting has been called for the end of April, specifically to discuss people’s concerns and provide clarity to EU residents on a way forward.

For now, everyone seems to be sitting still and waiting to see what happens. The short-term outlook seems fairly stable as we wait for details of the withdrawal to be decided upon. The negotiations are going to be interesting as both sides try to protect their citizens and bring about the best separation possible.

 

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