FX in the spotlight: Brexit implications for business
Philippe Gelis, CEO and co-Founder of Kantox, assesses whether the UK is heading for a hard or soft Brexit and what the implications are for business…
Since the fateful decision on June 23rd to exit from the EU, uncertainty has become the new normal for the UK. We saw the pound plunging nearly 20% against the dollar – marking it as the worst performing G10 currency in 2016 – as whispers and speculations around hard Brexit, soft Brexit, or even a backtrack on Brexit took over the nation. But in recent weeks we’ve finally started to get a sense of what Brexit may look like to UK enterprises and it seems that Prime Minister Theresa May wasn’t bluffing when she famously claimed “Brexit means Brexit”.
After much debating in the Commons, the UK is set to invoke Article 50 in early March. With MPs giving their majority backing to the Prime Minister to start withdrawal talks on her terms – by 494 votes to 122, many now claim that a hard Brexit seems far more likely – including tighter controls on immigration and an exit from the single market. In some respects, this removes some of the uncertainty, as the nation has more direction than before on the shape Brexit will take. But the reality is that there are still a number of variables and possible outcomes, all of which will impact the future of the UK, meaning the outlook is still very much an uncertain overall.
If this is indeed a hard Brexit, what does it mean for Britain? Fear of a hard Brexit and subsequent loss of direct trading rotes with the EU has been the main driver behind the devaluation of sterling since the referendum result in June. Meanwhile, enterprise investors have equally expressed their concern that the UK could lose its biggest trading partner and many banks have threatened to leave the UK if the final Brexit terms don’t fall in their favour. Whether such drastic measures will be taken remains to be seen, nonetheless, businesses should prepare themselves for episodes of strong pound volatility in the months ahead.