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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Brexit: The Chaotic Divorce Saga Continues

Politics / BrExit Mar 28, 2017 - 12:21 PM GMT

By: Boris_Dzhingarov

Politics

"It will be a formidable challenge for Britain’s next prime minister to make an economic, diplomatic and political success out of Brexit. Or, to set the bar at a more realistic level, to contain the damage." –  Andrew Rawnsley

Much has been, and continues to be written in the press about Great Britain and her extraction from the European Union (EU), and by the looks of things, it is turning out to be a very messy divorce. The bad news is that Theresa May, the British Prime Minister, has not triggered Article 50. For the uninformed and confused among us, Article 50 is the formal notice that the UK needs to give the EU that she intends to withdraw from the European Union.


Brexit: The GBP and the economy

Unfortunately, Brexit's impact on the British Pound (GBP) and the UK economy as a whole is going to be significant, and it will end up costing both UK companies and citizens a substantial amount of money. Many European Union companies whose head offices are currently in London are looking to move their offices to other EU countries. In fact, Ireland seems to be a popular choice for many EU companies.

According to the Nathan Trust website, "Brexit has triggered numerous companies, specifically within the Financial Services industry, to inquire about moving to Ireland. Although it may seem that Ireland stands to benefit from the uncertainty caused by Brexit, relocating operations to Ireland can hold many benefits for a company."

The GBP has been steadily falling since the Brexit referendum. Currently, "analysts at a leading European investment bank have warned the Pound to Euro exchange rate (GBP/EUR) could well fall to 1.0."

This drop will trigger massive losses for investors and businesses alike; furthermore, the challenge is that economists and financial market investors believe that there will be a hard Brexit;  without the binding trade agreements between the UK and the rest of the EU finally negotiated before Britain leaves the European Union. If British negotiators cannot finalise new trade agreements between the EU and herself, then Britain will leave the EU without any trade agreements between herself and the EU.

Brexit and UK business

Unfortunately, the impact of a hard Brexit will probably cause many British companies to realise a substantial drop in their overall operating capital and ultimately their profitability. Lamentably, this will have an adverse impact on the affected businesses. We all know that when profit margins and operating capital are reduced, there is a grave risk of the business being liquidated.

However, the good news is that there are companies such as merchantmoney.co.uk who are willing to provide bridging finance to help British businesses get through the post-Brexit period until they can increase their operating capital and profit margins again.

Final words

Even though the future does not look particularly rosy for the GBP and by extension the British economy, there is always hope for the future. I believe that once the Brexit process has been finalised, the UK economy and the Pound will bounce back. The challenge is coming through the interim period unscathed.

By Boris Dzhingarov

© 2017 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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