The dramatic – and historic – vote on June 23rd for the UK to exit the EU caught many organisations short, not least the EU itself. Both stock markets and currency markets were anticipating a narrow majority for the UK to remain within the EU – on a similar basis to the 2014 Scottish referendum. But it was not to be. As a result, the financial markets have reacted sharply in recent months, although other non- Brexit factors have also come into the equation.
On the political front, implementing the UK Brexit vote will take many years and will be a lengthy process. The Government does not plan to trigger the all-important Article 50 exit clause until early next year – and possibly later. Given its two-year window, during which painstaking negotiations will take place, it is unlikely that any long-term impact will arise before 2019 in terms of a clean trading exit from the Common External Tariff (CET) policy of the EU.
Not surprisingly, the £ Sterling took a heavy hit as the currency markets reacted to the surprising Brexit outcome. Initially, there was simply shock. In more recent weeks, the £ Sterling has been kept down by the recent reduction in interest rates to just 0.25% - and a further bout of quantitative easing. However, the falling exchange rate has provided some benefits to the economy as UK goods and services become cheaper in international terms. And, for large US$ earners, Brexit’s exchange rate impact is set to boost translated earnings.