Brexit? What did Deloitte conclude? July 2016

Having listened to Deloitte’s Brexit webinar this AM; these are the pertinent points to a complex period ahead.

Economics

 

  • They see this as a shock similar to Britain exiting the ERM in 1992 or Lehman Bro’s in 2008
    • Decrease in liquid assets, equities
    • Businesses will focus on cost control
    • Confidence will fall
  • UK will continue growing, but at a reduced rate (from 2% forecast to 1.4% 16/17 and 0.7% 17/18), so we won’t go into Recession
  • Medium-term (2-3 years) growth will be dependent on how successful / speedily negotiations can occur after Britain triggers Article 50 to start the withdrawal process
  • Damage has particularly been concentrated within Banking and Construction/Property within the FTSE 100 for the moment – 4.9% down overnight
  • FTSE 250 hit harder – down 8%
  • Deloitte’s research with CFOs forecasts a further drop in appetites for corporate risk
  • Longer-term they see the UK reverting to 2% growth

Survey of people listening to the webinar: >50% of listeners forecast either a slight (1-5%) or major (>5%) decrease in profits. Only <10% forecast a slight or major increase

Policy – short term

  • They expect the potential leaders to issue free-market reassuring signals – potentially including tax breaks
  • They foresee central banks injecting liquidity into the financial markets, potentially even more Quantitative easing

Mechanics

  • Domestic politics will have an impact on the negotiation process – they will need to establish a team (both ministers and civil servants)
  • Article 50 ensures that the UK will be covered by existing EU legislation for a period of 2 years – this can be extended if both sides agree
  • Ratification of any new treaties would require agreement from at least 20 of the 27 remaining EU member states

Impacts for Businesses

  • Deloitte believes that FS businesses will have prepared the best for the shock, while corporates may have been waiting to see what happened
  •  2nd survey: >40% of respondents felt that reassuring internal and external stakeholders would be the key activity in the coming weeks

 

www.tracerecruit.com