Brexit: Keep Calm and Carry On, Again
A little more than three years ago, we shared our thoughts related to the results of the Brexit vote. Since that time, much has been said and written related to Brexit, its consequences, and the wide variety of individual opinions related to its likelihood and impact. None of it helped unify or clarify the path forward.
Until last week. Finally, to the exasperation of some and the relief of others, the path forward for Brexit is beginning to become clearer. Make no mistake, there are significant details for the U.K. to negotiate and finalize with the European Union, and there will certainly be contentious moments during the negotiations in the coming months. But the results of the vote in the U.K. last week have affirmed that Brexit will happen, most likely in a form largely consistent with the structure that has been negotiated by Prime Minister Boris Johnson recently.
The markets reacted positively to the results of the vote, not so much because of the economic impact of Brexit, but simply out of relief that some level of clarity is taking shape. The British pound rallied against both the euro and the U.S. dollar on the results of the vote.
However, as in many things, the devil is in the details. And the current structure lacks both details and consistent agreement on what the details should look like, even within U.K. leadership. As a result, expect more volatility in the coming weeks and months as the negotiation of the details continues, and the politicking that goes hand in hand with these continuing negotiations. While the results of last week’s vote would suggest that U.K. Parliament will approve the current proposal by January 31, 2020, and the details of the trade agreement between the U.K. and EU would be finalized by the end of 2020, an extension of these dates would not be surprising given they contain some rather contentious elements.
Further, the negotiations to finalize the details of Brexit will take precedence over any trade agreements outside the EU, including anything with the U.S. Those trade agreements will occur with time, but only after the process of leaving the EU is resolved and effective.
Finally, with the passion that has evolved into every Brexit position, emotions continue to run very high. The impact of these passions will likely only make the underlying economic volatility even more pronounced. The “keep calm and carry on” nature of the U.K. will likely be tested in the coming weeks and months.
But the U.K. has affirmed its support for an eventual Brexit, even with the current uncertainty in the details and the economic impact. With that affirmation, expect the details to evolve slowly over the coming year. In the interim, may we all “keep calm and carry on,” again.
- Jeff Kvilhaug
- Chief Global Officer