As you would be aware the UK electorate has voted by a 52% to 48% margin to leave the European Union (EU). This was a surprise result for many and the initial response has resulted in a collapse in the UK pound, resignation of Prime Minister David Cameron,  and significant falls in global markets.

It is too early to give a definitive answer on the long-term implications of the vote, particularly as the situation is unprecedented and the process of leaving the EU may take some years to play out, complicated by the subsequent push for a second referendum. 

The UK and Europe will now face an extended period of uncertainty which will reduce confidence and act as a drag on growth as business investment is delayed. Trade with the UK is likely to be negatively affected while the UK renegotiates terms and there is the risk that other countries may also try to leave the EU. 
 
We expect this will result in the Bank of England taking action to prop up liquidity and confidence, most likely meaning that the existing 0.5% interest rate will be reduced to zero.

While the UK and Europe is expected to be impacted by the vote, many economists believe that the global implications of the UK / European slowdown will be less severe taking into consideration the following.

• The US and Chinese economies appear to be regaining momentum.
• Global liquidity remains positive.
• The US Federal Reserve and other central banks are likely to ease monetary policy in the event of significant market weakness.
• The UK only accounts for 2.3% of global growth.  

We expect that in the coming weeks volatility will remain high as markets seek to understand the long-term ramifications, which could result in buying opportunities for oversold companies.

We will continue to monitor the situation closely and will provide updates as the situation becomes clearer. In the meantime should you wish to discuss this matter in more detail please don't hesitate to contact our office.