On Thursday 23 of June, the UK expressed its will and 51.9% of those who voted decided to leave the EU. Understandably it was followed by shock and frustration and raised questions about the future and fears that businesses, the political system, and the economy will collapse. The first phase of shock is gone now and it's time to put emotions behind us and start thinking about new business strategies, and adjust to the UK's new status.
In the short term, there have been significant market declines, but investors are going to be frustrated for a while about what to expect in the future. Such uncertainty has hit the national currency, and it will be weeks if not months until it will start recovering. On the bright side, it's the best time in two years to sell euros for pounds, and the best time to sell dollars for pounds in 31 years, according to Pound Sterling Forecast. After the wave of panic, officials from the government and companies have finally started making official statements. In his speech, George Osborne, the UK's Chancellor of the Exchequer, tried to reassure markets of the negative impact on the future of the UK's businesses and trading relationships with the fellow EU members and other partners.
Mr. Osborne mentioned that the UK has been preparing to 'fix the roof' after Brexit. The UK is the 5th largest economy with strong financial resources and the influence to overcome the challenges. He added that his team and the Bank of England have spent months preparing for the consequences and they are coming up with a contingency plan.
The adjustments are going to be supported by a resilient UK financial system that has been strengthened following the 2008 recession. Mark Carney of the Bank of England, has stressed that the banks have undergone stress tests much more severe than the situation that has hit them recently. UK banks have managed to raise more than £130 billion of capital and currently operate with more than £600 bn of high-quality liquid assets. These resources will provide help for the households and the businesses to get them through the short term period of stagnation and potential decline.
Another point to consider before packing your belongings is the likeliness that the UK will join the European Economic Area in a transitory agreement in order to reduce a negative impact. Additionally, a two-year countdown for completely leaving the EU bloc hasn't started yet, and the Prime Minister, David Cameron, has announced that an implementation of Article 50 of the Lisbon treaty is not going to be triggered until at least October when he officially resigns. Even then, many believe the time can be stretched further, so the UK has time to digest the consequences and build a new strategy.
One option is to look beyond the European trading markets, which is both a challenge and an opportunity. The absence of the EU regulations will mean the U.K will be fully responsible of its trading relationships with other countries, although that means longer negotiation processes and potentially less lucrative deals given the smaller market. Paul Drechsler, president of the CBI stressed that the government has to clearly address the message that Britain is open for business. The Institute of Directors said almost two-thirds of more than 1,000 companies polled, are thinking of moving their business elsewhere, with a quarter willing to stay. Yet, there were only a couple of official statements that some companies have started relevant procedures. Moving a business from one country to another is not easy, especially if it has settled in firmly, therefore, many presume that it's sensible to wait for the situation to calm down before making serious decisions.
Business is very pragmatic and gets bored easily with those who are focussed on highlighting the problems rather than finding solutions. There will be a negative economic impact and there is likely to be a slowdown in the housing market. However, it's worth considering long term benefits and seeking new business opportunities, even if the short term impacts seem to be unsurmountable.