Bevan Graham and Keith Poore - AMP Capital Investors
Britain’s decision to exit the European Union (“Brexit”), followed swiftly by UK Prime Minister David Cameron’s resignation, creates considerable economic and political uncertainty. It will be some time before we know all the answers. The negative market reaction to the narrow victory (52% vs 48%) for the “Leave” camp has been exacerbated by markets going into the referendum expecting exactly the opposite outcome, a narrow “Remain” victory.
It’s important to note that nothing changes immediately for the UK. For a start the referendum is not legally binding. Parliament needs to pass legislation to start divorce proceedings and a majority of the Parliament support remaining in the EU. That said it would be only politicians with a desire for short political careers that would vote against the will of the people.
With the passing of the necessary legislation therefore a virtual certainty, the UK will then begin negotiations with the EU over the rules governing trade access for goods and services and the mobility of labour. The two parties will have a minimum of two years to negotiate the terms of the separation and new access arrangements. It’s conceivable this could take longer than two years. In the meantime nothing changes but uncertainty about future arrangements will prevail. Read more....
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