Anarchy in the UK? By: Gabriel PotterMBA, AIFA® 2016.10.04

When Prime Minister David Cameron stepped out as a result of the British exit vote (i.e. the Brexit) from the European Union, there was fear that a member of the more radical UK independence party (such as firebrand Nigel Farage) would take over the top job.  Instead, comparative moderate Theresa May from the Conservative party took over the reins, causing some to speculate that perhaps the politically non-binding Brexit might not occur or that it might not occur as a complete withdrawal from the European Union.  Some economists speculated that Britain might opt for a “soft” exit from the EU, perhaps with an arrangement comparable to Norway’s relationship with the EU where it lacks member state voting status but still enjoys benefits as a European Free Trade Association member.   

Although Prime Minister May is seen as a largely stabilizing force, she has not indicated that she will stand against the EU-separation.  This week, she provided some clarity on the timeline for the divorce.  She promised to trigger Article 50 of the EU Treaty during March 2017.  After Article 50 is triggered, there are two years left for the separation to finalize.  The future negotiations between Britain and the EU regarding immigration and trading arrangements will occur during this two year gap, so there are plenty of specifics left to be resolved.    Clarity is usually a positive for investors.  In this case, however, knowing that something bad is coming and that there are a lot of complicated questions to answer in a two year gap is not welcome news.  British currency has hit a three-year low on the announcement of the British exit deadline.

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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