
It will be sometime before the full implications of Brexit are known and we see exactly what a post-Brexit UK looks like, but the last fortnight has provided a glimpse of what is in store while that picture takes shape. While the politicians in Westminster work that out, the UK faces a protracted period of uncertainty that presents businesses with both opportunities and challenges.
One of the most immediate and obvious effects of the decision to leave the EU was seen in the currency markets. In the hours following the vote sterling dropped to 30-year lows against the dollar, falling by ten per cent. It also fell by 12 per cent against the yen and six per cent against the euro. This is already making life difficult for importers, which are seeing the costs of the goods bought from overseas increase. Those companies that hedged currency exposure ahead of the referendum, to lock in a more favourable exchange rate, will have been able to weather the storm and have bought time to adjust to the new currency conditions. However, those that didn?t will already be looking at margins and contemplating the options available. One thing businesses cannot afford to do is ignore the movement and wait for exchange rates to return to pre-Brexit levels. While this could happen, the technical data points to sterling heading even lower. Sentiment and politics currently outweigh the importance of economic data and, in an environment where we have a new prime minister, there is no unified opposition and a singular and coherent plan for Brexit is yet to materialise, the pound is likely to remain under pressure. Add to this indications from Bank of England governor Mark Carney that interest rates could go down and that further quantitative easing is back on the table in a bid to reassure financial markets, and the pound looks more likely to further test the historic lows we?ve seen against the dollar than mount a sustained rally ? in the short term at least.Brexit: Here’s what Article 50 of the Lisbon Treaty means
Firms reliant on selling into domestic markets are also likely to see tougher trading conditions as consumer confidence shows signs of weakening. The latest YouGov/Cebr Consumer Confidence Index showed a sharp decline since the vote, with confidence now at its lowest point since May 2013. Faced with so much uncertainty, people are growing increasingly concerned about their jobs and future economic wellbeing. As prices rise, we?re likely to see a reduction in non-essential expenditure and big-ticket purchases, putting further pressure on importers. Read more about Brexit:- How businesses can make sense of the post-Brexit uncertainty
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A 500-word summary of the short and long-term Brexit business implications
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