Stop worrying about Brexit: its all good...so long as....?

Analysts at Rabobank noted that the United Kingdom will increasingly be faced with the consequences of the vote to leave the EU, known as Brexit, in the referendum of 23 June this year.

Key Quotes:

"A weak pound in combination with what at the moment looks like full British access to the internal market will form a strong buffer in the coming years, and the direct effects of the referendum on economic growth would appear to be not too serious.

The depreciation of the pound will however lead to a sharp increase in inflationary pressure. While it is still unclear what the UK’s future trade relationships with the EU and the rest of the world will look like, uncertainty will prevail.

Our base scenario assumes a smooth Brexit which, despite all the rhetoric, will ultimately not cause unnecessary damage. One focus of attention in the coming years will be the inflow of direct foreign investment. The UK has traditionally been an important base for foreign companies and financial institutions and is therefore exposed to a potential loss of confidence. In the worst case, the UK could lose its unlimited access to the internal market, which would be bad news for the country.

Foreign banks in the City could lose their ‘European passport’ and leave London, and British industry would have more difficulty in exporting to the EU. However, one cannot entirely rule out the possibility that the UK will ultimately not turn its back on the EU, if for example sufficient concessions with respect to migration of labour can be obtained.

There is also a court case in progress to decide the issue of whether the UK government is entitled to trigger Article 50, which deals with the starting of the exit procedure, without having obtained the approval of the parliament."

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.