Economics & Markets

Brexit: the uncertainty continues

By Diana Mousina
Economist - Investment Strategy and Dynamic Markets Sydney Australia

At the moment, it still remains uncertain how the UK will leave the European Union (EU).

With the UK parliament yet to agree how it will leave the EU, it’s possible that the 29 March Brexit deadline may even be extended. But assuming parliament does agree the terms for this landmark event, a ‘soft’ Brexit at this stage seems most likely.

In January UK Prime Minister Theresa May’s initial Brexit plan was defeated in parliament, and the next major step is for the UK parliament to agree a new withdrawal agreement, which is the document that sets out how the UK will leave the EU over the next two years.

Overall, the UK parliament is pro-Europe, which bodes well for a ‘soft’ Brexit, in which the UK would remain part of the single market and customs union. This would be a positive outcome for British businesses and economic growth.

A ‘hard’ Brexit, in which the UK would no longer be part of the customs union, risks a UK recession and a potential half to one per cent hit to Eurozone growth.

We believe the present uncertainty about the UK’s place in Europe may flow through to UK equities and the British pound sterling over the near term.

The impact to Australia is likely to be minimal given local exports to the UK only make up 1.4 per cent of all exports, based on 2018 numbers. Nevertheless, Brexit could prompt global volatility in markets and a hit to investor confidence.

While there’s a slim chance the UK could go back to the people and hold another referendum on whether or not Brexit should proceed, consensus is it will go ahead. Markets are looking for guidance about what the deal will look like, and its timing, to help support UK and also EU asset values.

  • Economics & Markets
  • Opinion
  • Politics

Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.

Cookies & Tracking on our website.  We use basic cookies to help remember selections you make on the website and to make the site work. We also use non-essential cookies, website tracking as well as analytics - so we can amongst other things, show which of our products and services may be relevant for you, and tailor marketing (if you have agreed to this). More details about our use of cookies and website analytics can be found here
You can turn off cookie collection and/or website tracking by updating your cookies & tracking preferences in your browser settings.