Hotel Brexit: Checkout Anytime But Never Leave?

All eyes have been on the U.K. 52/48 Brexit vote which was in favor of the United Kingdom becoming the first country to leave the 28 member European Union. This could become a Hotel California (Hotel Brexit) where you can checkout anytime, but can never leave. Only time will tell. 

We are going to hear a lot about this vote and its implications going forward the next two years – because that’s how long it’s expected to undo the UK’s role in the European Union. 

Topics that have spearheaded the Brexit movement include:

  • Migration
  • Housing
  • Welfare
  • Jobs
  • Wages
  • Regulations
  • UK doing its own trade deals

It has been predicted that fallout from an affirmative Brexit vote would have negative repercussions for the UK including:

  • The Pound could fall by up to 20%
  • UK stocks could fall by nearly 25% due to confidence about trade with the EU (and as large companies reassess their commitment to the UK)
  • The IMF is predicting a recession
  • Unemployment is forecast to go up because an affirmative Brexit vote will put hundreds of thousands of jobs at risk and push up unemployment
  • The UK Treasury said the likely shock of an affirmative Brexit vote will blow a hole in the budget – so taxes will have to go up – and spending will have to be cut

Despite all these dire predictions, the Brexit vote still passed 52/48.

I suggest most of these “fears” about what is going to happen (because of an affirmative Brexit vote) were already set to happen, regardless of the outcome of the election.

Let me say that again . All of the dire consequences from unemployment, to currency and stock market declines (and everything else) have already been baked into the upcoming economic cycle in the UK and the EU. 

Now that Brexit has passed, we simply have a convenient excuse to anchor these circumstances (which were already coming – and were unavoidable), into the public mind. Had Brexit not passed, the vote would have been close, and the narrative would be that confidence was still lost – and that was the cause for whatever ills followed in the marketplace.

But those ills are coming – regardless. Because debt problems cannot be solved with more debt. A rebalancing must occur. Brexit will be part of that process.

Remember, it’s going to take at least 2 years to renegotiate all the laws, rules and regulations that intertwine the UK and the EU. That picture, that reality, may – look very different two years from now – than what people think they actually voted for today.

When it comes to the UK and EU, the names might change, the places might change, but the UK story might ultimately remain the same. Just like the Hotel California (Hotel Brexit) where you can checkout any time you like, but you can never leave. 

Only time will tell.

By | 2016-07-27T15:38:41+00:00 June 24th, 2016|Categories: Economy|

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