Whilst the word 'historic' has rarely been
used so frequently over the weekend, it is clear that Friday will be one of
those significant days in all our lives that we will never forget. This is as close to a revolution as we've experienced
in my lifetime. And it's only just begun.
The economic impact will be far reaching and
there will be key areas to watch:
Exchange Rate
The pound has already taken a battering and
the value against major currencies is a true indication of foreign confidence
in the UK. The value of sterling against the dollar reaching its lowest level
since 1985 tells you all you need to know and will have a huge impact on UK
imports / exports. As oil is bought in dollars, expect to be hit at the petrol
station soon.
Investment Markets
Share and bond markets are also a good
indicator of confidence in an economy. Clearly with political and economic
uncertainty as a result of leaving the EU, investment markets are likely to be
volatile and there could be more panicking to come.
Foreign Investment
Leaving the EU is hardly an invitation for
foreign investment into the UK. In fact, it makes little sense to invest in the
UK with so much uncertainty over the next 2 - 3 years. This will have a
significant impact to many UK businesses. In addition, it wouldn't be a
surprise to see multi-national companies move their UK operations to a more
stable country.
Bank of England
It is clear from the banking collapse that
the Bank of England will have a significant role to play. Their decision making
will determine whether our exit can be orderly or if it will be hugely volatile
/ panicky. A key short term aim over the next 18 months is to take appropriate
actions to avoid the UK going into recession. Expect interest rates to go to 0%
and significant funds being made available to prop up the banks again.
Housing Market
A measure of consumer confidence in the UK
has always been the housing market. When the housing market is moving and
prices rising, the confidence this brings sees consumers spend. However, when
there is economic uncertainty, the housing market dries up, prices start to
fall and we stop spending generally. The UK economy is very dependent upon
consumer spending and a slowdown would escalate a recession.
So that's the economic outlook. However, it
is the political legacy of the vote result that 'amuses' me the most. Last year
we democratically elected our Prime Minister. Last week we democratically
decided to leave the EU. However, the byproduct from Friday is that we will
have a new Prime Minister by Autumn who will not be democratically selected and
instead will be chosen by Tory back slappers. The new non-democratically
selected Prime Minister will then serve for a longer period than the
democratically elected one. An undemocratic democracy......who'd have thought
it!
The fallout will be far reaching and I fear
for the many losers of the vote decision. Let's hope that a political leader of
worth is chosen that can lead us through the minefield of leaving the EU.
Steve, it seems to me there are no worthy political leaders.
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