Brexit

Brexit Rattles Global Markets, Impending Uncertainties and Risks for Britain and the EU

   June 24, 2016   |   Brexit, Cyber Attacks, Global Markets

As widely feared, Britons have decided to leave the European Union (EU). In a closely followed referendum, opponents of the EU membership had their say, winning a majority by securing around 52% of the total vote against 48% who voted to remain in the EU. 

The outcome of the referendum has unnerved global market participants and multinationals because the impact of the vote will be far-reaching.

Just after the referendum, the sterling slumped almost 10% to a 30-year low against the US dollar while the euro also took a beating. This is understandable because both economies are closely tied. The outcome of the poll might only worsen Britain’s relationship with other EU nations, which in turn, could damage the market sentiment and investors’ confidence.

A weaker sterling and euro could also spark-off a global currency war as individual nations might devalue their currencies in order to make goods and services more competitive in international markets. Any such move, could result in uncertainty and an unprecedented volatility.

Moreover, there is a growing fear over a possible recession in the UK. Indeed, according to a data provided by the Wall Street Journal, the British economy was weakening compared to France’s and Germany’s until it entered the Union back in 1973.

In other words, empirical evidence suggests that the British economy prospered after it joined the EU. A weaker and poorer Britain can only pose serious risks to public finances, job creations and the overall GDP growth. Likewise, the EU economy could also face the heat as its trade with Britain probably might be impacted.

A wobbly Europe could also hurt the Indian economy as its exports might take a beating, although the impact should not be as big as one might witness in the Britain and EU.

Another worry is that the vote on #Brexit could flare-up the anti-immigration sentiment in other countries as well. Nations might become more protectionist. Should that happen, it will not be a good sign for economic prosperity, fair competition and development. A hostile environment could also spark-off organized cyberattacks from rogue nations.

To sum up; the vote in favor of #Brexit has only created risks, uncertainties, and vulnerability for the global economy. 


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