As you are likely aware, on June 23, the United Kingdom voted to exit from the European Union (triggering the so called “Brexit”). The unexpected decision by British voters has resulted in uncertainty and immediate volatility in global financial markets. To be sure, this decision has led to more questions than answers, and it will take some time before clarity can be achieved.
Clark Schaefer Hackett has received numerous calls from our business clients requesting our reaction and direction. We are monitoring the situation and will update our clients as the full impact of Brexit becomes clearer. In the meantime, here are our initial thoughts and recommendations following this historic event:
- In the short term we anticipate continued market and currency volatility as uncertainty continues to be the overriding theme.
- Nobody will know the full implications of Brexit for some time, at least two years. There are a number of actions that must take place before the UK can officially leave the EU, including examining the withdrawal request, managing likely appeals and negotiating exit terms. Expect uncertainty to linger for some time.
- We could see additional geopolitical threats to the economy resulting from a potential breakup of the United Kingdom (if Scotland and/or Northern Ireland seek independence) and the possibility of referendums by other EU member states to exit the union.
- The Federal Reserve will likely keep interest rates steady for the remainder of the year, reversing any previously anticipated rate hikes.
- Our business clients with little or no exposure to Europe will see little impact other than ripple effects from volatility in the global market and economic environment.
- Our clients that do business in the United Kingdom and/or the European Union (whether they simply import/export or have foreign subsidiaries) should take a wait-and-see approach until some of the uncertainty has been resolved. Decisions regarding tax and trade treaties and agreements will take time to negotiate, so for now it’s business as usual.
While the decision of UK voters to leave the EU was not expected and the resulting effect on global markets has been drastic, we don’t believe it’s time to hit the panic button. In the near term, we anticipate the greatest impact of Brexit to be continued market and currency volatility. For the long term, as more details regarding Brexit become solidified, businesses should monitor the developments and assess the impact on their specific situation.
Clark Schaefer Hackett is here to help. Our International Business Services Group will continue to keep a close eye on the effects of Brexit and will provide regular updates to our clients. This team specializes in providing planning and consulting to companies who do business overseas, with solutions that are focused on the needs of middle-market organizations. If you have any questions or would like to discuss how Brexit might impact your business, please contact your CSH representative or Dan Fales, International Business Services Group chair, at [email protected].