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Brexit Developments

The complicated realities of leaving the European Union are becoming more obvious as the deadline for withdrawal in March 2019 draws ever nearer. It is widely agreed that a transition period to the final arrangements is necessary and desirable. But the terms of the transition need to be consistent with the final agreement, which itself is far from agreed. It is worth considering some of the longer-term considerations here.

Not just the UK

Before delving into the detail, it should be pointed out that the effects of Brexit will resonate beyond the UK. A major member of the European Union (EU) has chosen to leave one of the three biggest trade blocs in the world at a time when protectionism and nationalism are unusually high on international political agendas.

The UK’s separatism chimes with thinking in the current US administration, leading to the overtures that have been made about strengthening trade ties between the two countries. Should this manifest itself in closer arrangements then the UK will benefit directly, but it will be less good news for the remaining members of the EU.

Germany, for example, will be keen not to lose too much of its net £25 billion of exports to the UK, while Spain benefits from considerable net revenues thanks to services and tourism among other trades. (1)

Meanwhile, the underlying sentiment of nationalism could be nurtured if other EU members perceive there to be a benefit from leaving the Union. Whether the outcome is positive or negative, it will have international implications not least due to the effect on the value of investments held by overseas entities.

(1)Office for National Statistics, The Pink Book 2017, Table 9.3

 

Important Information

Forecasts of future performance are not a reliable guide to actual results in the future, neither is past performance a reliable guide to future performance. The value of investments, and the income from them, may fall as well as rise and cannot be guaranteed. Any views expressed are our in-house views at April 2018. Investment markets and conditions can change rapidly and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This information may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

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