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Quick takes: It's official, Britain votes for Brexit

Friday, June 24, 2016 - 15:52
38835431.1 (38836973) - 24_06_2016 - BRITAIN-EU_.jpg
BRITAIN has voted to break out of the European Union (EU) with the "Leave" campaign securing around 51.8 per cent of the vote, prompting David Cameron to resign as prime minister in an emotional speech outside 10 Downing Street on Friday.

BRITAIN has voted to break out of the European Union (EU) with the "Leave" campaign securing around 51.8 per cent of the vote, prompting David Cameron to resign as prime minister in an emotional speech outside 10 Downing Street on Friday.

Here are some experts' views on what this means:

On Europe:

Toby Nangle, co-head of global asset allocation & head of multi-asset, EMEA, at Columbia Threadneedle Investments:

"The outlook for European risk assets is clouded. We see a hit to UK growth in the short as well as medium term, and this economic loss emanating from the UK will impact the nascent economic recovery seen across the continent. But valuations will be hit hardest by the profound uncertainty as to the prospects of political contagion rather than any immediate impact to company bottom lines.

"Rarely are risk events so well diarised. This has not helped markets price what looks this morning to be the ultimate outcome, but it has helped central bank prepare contingency plans and we anticipate that they will be there to provide copious liquidity if required."

Rick Lacaille, State Street Global Advisors' global chief investment officer:

"While the vote to leave has immediate market implications, over the longer term observers will be wary of the impact the vote has on other nationalist and protectionist movements - both in Europe and elsewhere. . . There is the potential for knock-on consequences for market-moving issues like trade, labour mobility and foreign investment. How the EU strikes a balance between facilitating a swift UK exit to reduce risk as quickly as possible, and discouraging similar movements in other countries, will be important."

On UK property market:

JLL UK chief executive officer Chris Ireland:

"Even if it is effectively 'business as usual' for the UK in terms of trade and legislation until 2018, such a major change will inevitably create uncertainty in the economy and real estate markets. In the event of a well-managed exit these impacts will be largely confined to the UK.

"In the short term we may see a weakening in occupier demand. The impact on rents may be limited by tight supply, but activity will be adversely hit while initial uncertainty about direction and timing continues. Investor sentiment may also remain subdued in the short to medium term.

"For property markets, the initial correction may be most severe but should be followed by an upturn as opportunities re-emerge in UK core markets and benefits of weak sterling are recognised. Sentiment and relative pricing will be key.

"Much will depend on the speed of negotiation, the wider political picture and whether a clear direction of travel and timetable for an EU exit is established early on."

On Gold:

Naeem Aslam, chief market analyst, Think Forex UK:

"The precious metal (gold) is on fire and it is the real winner of Brexit situation. Investors are really trying to protect their investment and we are seeing some big bets coming in the market which is pushing the metal price higher.

"There could be a lot more downgrades and warning on the way from different rating agencies which will also impact the country's rating and this may just only boils the volatility even further in the market and that may help to push the gold price even higher.

"Moreover, we are not even sure if David Cameron will stay as a prime minister and this itself is also worrying traders and triggering more demand for gold.

"The next resistance is at 1,400 which can easily be taken as the European markets will open. The Dow Jones futures are pointing a 650 point drop and today could be one of those days when we will have may be over a 1000 points drop."

On China:

Nathan Chow, DBS HK/China economist:

"The most important implication perhaps lies in the longer term. In particular, many Chinese companies would consider moving their European headquarters to other countries if UK exits the EU.

"Between 2010 and 2014, Chinese companies spent US$53.7 billion direct investments in European countries. The UK is by far the biggest recipient, with a cumulative total of US$11.4 billion over that period (Luxembourg is second with US$9.9 billion and France the third with US$8.2 billion).

" Even the spokesperson for the Chinese Foreign Ministry recently stated Beijing's position, saying: "China has always supported the European integration process, as we would like to see Europe play a greater role in international affairs." It is highly unusual for Beijing to be this overt about its opinions on another country's domestic affairs. The emphasis that Cameron and Xi put last year on the new Sino-British "special relationship" could backfire for both leaders if British voters decide to leave the EU."

On small and medium enterprises:

Professor Stephen Roper, Warwick Business School:

"Small businesses need to prepare for a period of volatility as markets react. Gains in terms of reduced regulation and EU membership costs may follow, but are probably some years off.

"Over the next few weeks a weakening of sterling will help exporters, but will make euro imports more expensive, raising all small firms' input costs. Interest rates too may need to rise raising business borrowing costs. Longer term, European firms may also switch orders away from the UK to insulate themselves from any changes in trading relations between Britain and the EU.

"The gains for small firms from Brexit are probably two to five years away. There is potential for reduced regulation and new trade deals, but the timing and effects of both remain uncertain. Outside the EU the UK will also be free of EU competition and state aid rules allowing the UK government to provide more direct support to SMEs."

On multinational corporations:

Professor Christian Stadler, Warwick Business School:

"It is not clear what's happening next and businesses will be reluctant to invest. I don't expect that there will be a massive exodus, but rather than expanding in the UK, companies are likely to do it in Europe instead, particularly for businesses which export to the EU.

"The devaluation of the pound should help exports slightly, but it will be an issue for all those who have EU suppliers. There is an expected contraction of the UK market, which will hit sales in the UK.

"In the long term if the UK follows the Swiss model, which is essentially adopting EU regulation minus having a say in the decisions, this would be the better option for businesses as it puts dealing with the EU more or less back to where it is at the moment. This will be an issue for some industries, like banking, as they won't have much of an influence on regulation anymore. We see that in Switzerland for the pharma sector for example. Politically this would be a difficult one to pull off as people have to put up with the things they did not want - most prominently immigration.

"If the UK takes a tougher stance on immigration, for businesses this will be a disaster as the EU will retaliate. Access to the EU will become difficult. For some companies this means doing business in Europe won't be attractive any more. Others will have to deal with complicated bureaucracy. In short: a nightmare."

For more coverage of the EU referendum, visit bt.sg/BrexiT

 

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