Boris Explains How Brexit Could Promote Trade in the United Kingdom

The United Kingdom joined the European Union in 1973. Two years later, it confirmed its membership through a referendum. In the 1980’s, a move or decision to exit the European Union was supported. Unlike then, the same movement is highly discouraged currently. Of late, the news headlines have been labeled with bold statements screaming Brexit. Although the United Kingdom has not made a decision to exit the European Union, investors and politicians have started predicting the future of stock markets in the region, in the case of Brexit. Boris Johnson explains that amidst all adversities, Brexit could be a good move for the people of the United Kingdom.

Export Business

While giving his first speech in the completed general elections, Boris said that Brexit would allow Theresa May to enter into business with the United States of America and India. As a result, there would be a trade in the foreign exchange market. This is good for business in the United Kingdom. Boris made it to the general elections campaign amidst sources from people that Theresa May, the serving prime minister of the United Kingdom, would take full credit for his victory. Boris further added that Brexit could mark the beginning of a new, positive era in the world of business for the United Kingdom.

Trade

Citing haggis, the staple food of Scotland, was banned in the United States of America as one of the products that can be exported for business. He also added that Scotch whiskey would make an excellent export venture. This brand has a heavy duty tax in India. Boris added that while walking in Uxbridge, he encountered a wooden display of counter. The proprietors were selling Toblerones. This was in Saudi Arabia. If the United Kingdom could hack such markets, it means that Brexit can be a good thing in the end.

As Brexit Gets Triggered, Companies Look to Leave the UK

The British Prime Minister, Theresa May, officially has triggered the British negotiations with the European Union related to the UK’s exit from the common market. The negotiations will take two years, and could be potentially extended. The British will need to change multiple laws, which are currently entrenched in the system after 40 years as part of the EU.

 

The European leaders aren’t going to make this divorce easy. The British would like to exit smoothly while keeping access to the common market. But, Angela Merkel, the German Chancellor, stated that before any trade talks take place, an agreement must be made about ways to severe the highly linked relationship.

 

This means, CNN Money claims, the Brits will not know for quite a while what kind of a trade deal they’ll get. If there’s no trade deal, WTO tariffs will apply. This uncertainty isn’t good for business. And some companies aren’t willing to wait.

 

Some operations and jobs are already being relocated to continental Europe. For financial institutions, for example, it is crucial to keep the so-called “EU passport,” allowing them to offer their services across the EU member nations.

 

“For planning purposes, we must assume a hard Brexit in which the U.K. loses its ability to passport into the EU,” claimed James Cowles, Citigroup’s CEO for Europe.

 

Another financial giant, JP Morgan, is looking to move some operations to either Dublin or Frankfurt. Meanwhile, UBS and HSBC stated that they could move some of their employees outside of the UK. At the same time, AIG is setting up a unit in Luxembourg.

 

Other industries are affected as well. When it comes to automakers, their executives need to reconsider keeping their manufacturing operations in Britain. For airlines, there’s uncertainty as well. If no replacement deal is reached for Open Skies agreement, flights between the UK and EU could get halted.

 

As Brexit talks begin, Britain is facing a block of 27 nations. It looks like the Brits don’t have an advantage here.

Finance Minister Dijsselbloem Warns Brexit Could Be Catastrophic For UK Businesses

Jeroen Dijsselbloem, the current Dutch finance minister, recently stopped by in the UK to warn about the dire consequences of Brexit. Dijsselbloem told a reporter on the TV show Newsnight that Brexit is a “lose-lose” situation for UK businesses.

 

Dijsselbloem is very concerned about how the UK’s decision to leave the EU will affect relations between Brussels and London in the ensuing years. He believes that the Brexit decision on June 23rd could have serious consequences on how the UK trades with the EU member states.

 

Given these circumstances, Dijsselbloem recommended that UK leaders get used to the free movement of labor across the entirety of Europe. Only by agreeing with EU officials on substantive labor agreements could the UK work towards favorable trade deals with the European Continent.

 

Dijsselbloem went on to suggest that UK MPs should try and take a more favorable attitude towards migration. This finance minister believes the UK must accept the reality of migration to avoid catastrophic “suffering” in the future.

 

Later in the interview, Dijsselbloem said that “the UK will be outside the internal market and there will be some hindrances” due to the Brexit decision. He went on to say that the UK can only have a fully functional internal market if it allowed for the “freedoms of Europe, including migration within Europe.”

 

Dijsselbloem then went into a tirade against Foreign Secretary Boris Johnson, a noted supporter of Brexit. Dijsselbloem sees Johnson’s vision of a post-Brexit UK that is both within the internal market and outside the customs union as “intellectually impossible.”

 

Dijsselbloem hopes all UK politicians will reconsider the ramifications of Brexit and work with the EU during this difficult period for the sake of British businesses.

 

Financial Advisers Give Predictions On How Brexit Will Impact European Markets

Now that the world has had a few months to process the UK’s vote to leave the EU, many investment advisers are offering their thoughts on how this Brexit vote will change European markets. While there are a few positive contrarians, most investment advisers believe the Brexit vote will have negative effects on the British and Continental economies.

 

One of the main reasons for this pessimistic view of the post-Brexit European economy has to due with uncertainty. Companies in the EU and Britain will have a much more difficult time predicting long-term strategies, therefore most companies will delay investments until they can gain a sense of clarity on the future direction of EU/UK relations.

 

Sarah Ketterer, who is a manager at Causeway International Value fund, told reporters that all European investments have been delayed due to Brexit. Ketterer actually expects the UK to enter into a recession starting in 2017.

 

The British bank Barclays conducted a few surveys after Brexit to test consumer confidence and overall investment trends. They found that post-Brexit UK citizens have far less consumer confidence then before, and most British corporations said that they would delay investing in their own companies due to Brexit. Barclays also believes the UK will experience a recession very soon.

 

Financial experts at Barclays believe that Brexit will have a negative effect on EU member states. Barclays expects Europe to experience slower growth due to the aura of uncertainty Brexit has created around the EU.

 

The Bank of England also released a survey that showed most UK companies perceived Brexit in a negative light. Their research proved that UK companies expect Brexit to have negative effects on both hiring new workers and capital spending.

 

However, not all economists are pessimistic on the post-Brexit prospects of European markets. For example, James Hunt, who works for Tocqueville International Value fund, said that if Brexit officially happens next year, he thinks the UK economy will turn out OK after a few minor short-term setbacks. He also believes the Brexit vote could force the EU to finally implement some positive structural economic reforms.

 

Despite the majority of naysayers, it appears that Prime Minister Theresa May will officially lead the UK out of the EU next year when she invokes Article 50. Although some economists say that the UK can still back out of the Brexit referendum if Parliament wants to, Prime Minister May has made a promise to honor the country’s decision to leave the EU.

Why CBI is Pushing the United Kingdom to Join the TTIP Trade Deal

The Brexit move elicited various reactions across the globe, as various bodies and movements have come up with propositions for the UK to avoid negative economic repercussions. Recently, a report filed by the Confederation of British Industry revealed that the United Kingdom has to get into a huge trade deal between the European Union and the United States.

In a bid to maintain its position as the largest investor in the US economy, CBI proposed the UK has to join the Transatlantic Trade and Investment Partnership (TTIP). The Transatlantic Trade and Investment Partnership is a large trade deal between the European Union and the United States. The CBI is worried that the UK’s move to exit the European Union could cause Britain’s economy to miss out on the TTIP deal as well as free trade advantages with the United States.

British businesses boast as the largest investors in the American economy, as they inject about $449 billion, which is equivalent to £342 billion. Consequently, the businesses have triggered the creation of over one million employment opportunities.

Investment Competition

To attest to its investment prowess in the United States, the UK trounced Canada in terms of investment by investing about $200 billion more. In addition, the UK’s investment in the US was $76 billion more than that of Japan, its investment competitor. According to CBI, the UK’s portion of the US’s $2.9 trillion foreign direct investment was 15%. Other nations combined investment in the United States such as China and India did not attain a 1% mark.

Since the UK’s exit from the European Union, it has been struggling to find economic ground in the world, as the EU served as its largest consumer of service exports. The Institute for Fiscal Studies echoed that UK’s exit could trigger a loss of 4% of its economic output. It also added the possibility of weakening the government’s finances, which would give rise to a budget tightening of about £39 billion or $50.8 billion.

CBI reiterated that a clear strategy ought to be created to enhance trade with both existing and new business partners around the globe. It also pointed out that the US should be among the prioritized markets in a bid to lay stronger foundations for comprehensive trade in the future.

German Investor Confidence Rebounds

A new study in Germany has indicated that investors are increasingly coming to terms with the Brexit event and are slowly becoming more confident in the stock market in general.

The study in question was created by “The ZEW institute” and is a closely watched and influential study of investor confidence in Germany. The study summarizes over 200 independent analysts and determines who they view the market with the goal of predicting where the market will be in six months time. In August (through August 15th), the study noted an increase in investor confidence of about 7 points which is significant not only in the increase overall, but the move back to positive territory.

The index had plummeted upon the Brexit vote which pushed concerns about the impact that the move for England to leave the European Union would have on the rest of Europe. The vote for a Brexit came as a huge shock to the EU and in Germany in particular which has greatly decreased the market outlook.

Despite the move upwards in the rating many analysts are still skeptical of the overall trajectory of the market which is illustrated in the 0.5% rating, slightly in the positive end. In particular, as the DAX index in Germany has already increased by 15 percent in 2016 many people believe that a further increase in markets is unlikely. Mirroring these concerns are an overall reduction in earnings estimates in Germany which are down about 2% from last year.

However, the concern that the financial markets will come about as a result of Brexit has greatly subsided and many believe that there will now be a more orderly transition of the United Kingdom out of the European Union instead of the catastrophic event that may have resulted from the vote. Further, investors have become reassured by the steps that Europe’s central banks are taking to not only prop up the market but also to support the economy during the transition period as England leaves the European Union.

Further, improvements in production and investment across Germany, in addition to positive demographic trends and an increase in consumption, all signal that there is room for other positive moves for the market in the second half of 2016.

The Job Market Report In Britain Is Better Than Expected But The Pound Needs More Good News To Maintain A Rally

The British recently showed the world why it was the most powerful country in the world for centuries. The vote to leave the European Union was a powerful move. The European Union is going to miss Britain’s money, but it won’t miss Britain’s complaining. The British have been arguing with members of the EU for years, and the argument turned into a standoff that the people of Britain had to settle. The vote to leave the EU surprised some people. Even the Prime Minister was visibly shaken and resigned because of the vote. But Britain will do what it has always done when it makes a decision. It will turn the tables and make a seemingly bad situation a good one.

One of the challenges facing the British is the value of the pound. The pound has always been a staple in European life and against other European currencies, but the Brexit vote let some of the air out of the pound. The pound is trading at a three-low against the euro. The euro is not the best measuring stick for financial stability, however. The euro has its own issues to deal with, and the main issue is European debt. The pound did rally against the dollar recently, but the dollar is overvalued at the moment, so it’s not a fair measurement of financial stability either.

The British pound is at the mercy of political and economic uncertainty at the moment. How the British job market will do in the future depends on how well the Brexit team does while negotiating with the European Union. Inflation could be a factor since the inflation rate jumped last month. The cost of imports also increased because of the weak pound, according to an article published by Bloomberg.com.

Hedge funds and other big investors have not given up on the pound. Most investors know that the British will make a deal with the EU that is mutually beneficial. The European Union can’t afford to draw a line in the sand that can’t be crossed and Britain can’t either. Most members of the EU need Britain for one reason or another. One rumor is Britain could come out with a deal similar to Norway’s deal with the EU.

Britain Wants Control Over Immigration And Lawmaking And Rejects Compulsory Contributions To The EU

Britain has been talking about leaving the European Union for a couple of years. The talk became louder and louder as the migration issue became a crisis. British workers were also complaining that jobs in England were given to lower paid foreign workers, and that was creating an enormous amount of pressure to break away from the EU. The vote finally came on the 23rd of June. It wasn’t a surprise that most of the British were fed up with the European bureaucracy, the cost to Britain and the inflexibility that was strangling the British people.

The European Union has an assortment of issues on their political and economic plates. Britain’s decision to leave is just one of many. Any one of those issues could cause the EU to completely change the dynamics of its internal structure.

New Prime Minister Theresa May has vowed to respect the June 23rd vote, and she has asked Brexit Minister David Davis to work on a deal that is similar to the deal that Canada is in the process of structuring with the EU. Davis will try to add an additional clause that covers Britain’s service sector. Single-market access is one of the key issues in any new agreement with the EU because it will have an impact on Britain’s financial sector. Britain’s banks want to retain their passporting rights that allow them to work with clients in all EU countries, according to an article published by Bloomberg.com.

Davis and his team are studying which elements are most important in the current agreement with the EU. The Brexit team is analyzing the non-tariff barriers that discriminate against countries that are not members of the EU. Some of those barriers are how products are made, and what kind of inspection they undergo when they cross borders. Another barrier is how services are sold and who can sell those services.

When all the smoke clears, Britain will come out of this exodus better than expected. But it will take time. The pound has taken a mild beating because of the vote, but will bounce back. Britain has strong trading partners on its own, and the economy in Britain is better than the economies in some of the other European countries.

Think-Tank Urges Bank of England to Use Sledgehammer to Avoid Recession

The National Institute of Economic and Social Research (NIESR) has offered a bleak forecast for the United Kingdom post-Brexit, and believes that the Bank of England must use a sledgehammer to stave off the most dire repercussions of the referendum.

The well-respected British think-tank issued a report on Tuesday that lowered its previous economic growth forecasts by 0.3 percentage points in 2016 and 1.7 percentage points in 2017. According to NIESR, the slowdown will force the government to borrow £50 billion more than it planned.

Additional predictions include the loss of 320,000 jobs by the third quarter of 2017, inflation rising above 3 percent for the first time in 5 years, and a 50 percent chance of the economy sliding into recession in the next 18 months.

To mitigate the effects of Brexit, NIESR is urging the Bank of England to push their monetary polices to the limits. This would include a healthy dose of quantitative easing, and cutting interest rates to a record-low 0.1 percent when members meet on Thursday.

NIESR research fellow Jack Meaning suggested that policymakers take a sledgehammer to the economy, and said, “If they went to the limits they could almost but not quite offset the downturn we are forecasting.”

The think-tank issued a grim warning before the vote on Britain’s membership in the EU, and says the post-referendum data supports its previous position.

On Tuesday, a July survey of construction purchasing managers showed a steep decline in output and signaled the sharpest fall in business activity since the first quarter of 2009. Panthenon Marco analyst Samuel Tombs believes the drop in construction activity reflects a collapse in business confidence.

UK Interest Rates Decline With The Economy

With the United Kingdom’s economy in an unprecedented period of uncertainty, the government has taken extra steps to try and regain some control and incentivize people to continue investing. Specifically, The Bank of England has cut interest rates in half and has stated that more steps could be taken in the future if the economy does not start showing signs of recovery.

Aside from lowering interest rates to banks, The Bank of England has also announced a stimulus package that is designed to infuse the economy with an additional £100 billion. Governor Mark Carney has also said on the record that a majority of the nine-member Monetary Policy Committee were open to further steps if this did not resolve the situation.

New regulations have been designed to accompany the lowered interest rates, in the hopes that the savings from the The Bank of England will be passed on through banks to consumers taking direct loans. Following the Brexit, The Bank of England has drastically lowered its predictions for economic growth into 2017. Originally, The Bank of England predicted that the economy would grow by a little over two percent, but that prediction has since been reduced to less than a single percent.

Although this is the first change in interest rates since 2009, the Monetary Policy Committee is confident that it is the right step for correcting the economy’s current direction. Further plans to deal with the negative repercussions of the Brexit are to be outlined in the Autumn Statement.