Five Brexit scenarios for investors to chew over
By Kristen McGachey, 21 Jun 17
Brexit negotiations are officially underway. But what’s the final Brexit going to be – hard, soft, wobbly, red white and blue? Or will the UK economy simply plunge off the cliff edge? Investors weigh in.
By far the most anticipated result of the UK’s negotiations with the EU is a hard Brexit type scenario, a reality prime minister Theresa May has been prepping the country for since January 2017.
And the reason it remains the most likely possible outcome is because of the importance placed on immigration control by the UK public, with many voters equating Brexit with migration, said Societe Generale chief UK economist Brian Hilliard.
He explained: “The two main parties, both of which offered immigration control in their manifestos, jointly won 82% of the votes in the 8 June election.
“The government is therefore certain to impose it, which automatically ends the access of the UK to the Single Market.
“The government also wants to set its own tariffs, which would then take the UK out of the EU Customs Union as well.”
In this hard Brexit scenario, sterling’s fate is very much dependent upon whether a deal can be struck within the allotted two-year period and the success of lobbying efforts by EU exporters and other interested parties, added Seven Investment Management.
If the UK government enters into the negotiations without a clear mandate, prompting the EU to lose patience, it could end in a “take-it-or-leave-it deal” for Britain – WTO status plus a few carve-outs that Europe is particularly sensitive to – and would likely be a “dismal scenario for the pound.”
Tags: Brexit | Investment Strategy
