UK: Time to pep up on Brexit - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, notes that most commentators, in particular, those in much of the British media, continue to look at Brexit as a glass half-empty and there continues to be much handwringing and a proclivity to criticize PM May and her plans for Brexit.

Key Quotes

“There is no doubt there is considerable uncertainty at this early stage of a multiyear process, and the possibility to see much downside. However, the market is yet to really consider that outside of the shackles of EU membership the UK may be able to prosper.”

“As May pointed out during her speech on Tuesday, the UK has not clearly benefited as a trading partner in Europe.  Perhaps it has less to lose from broadening its focus from intrinsically EU focused trade and investment to viewing the EU as just part of its global market.  She noted that, since joining the EU, trade as a percentage of GDP has broadly stagnated in the UK.”

“Leaving the EU will presumably diminish UK trade with the block, but we do not know by how much.  EU leaders have frequently observed that Britain should not expect to get out of the EU without paying some price.  They want existing members to see benefits of membership.  But equally, they stand to lose if they treat the UK with contempt. EU exports to the UK have growth more significantly than UK exports to the EU, resulting in a widening UK trade deficit with the EU.  Germany is the UK’s top import partner; the USA is the UK’s top export destination.”

“The harder EU deals with the UK, the more likely the UK will move more of its trading volume to the rest of the world.  In any case, we might expect trade with the rest of the world to increase as a result of Brexit and serve as an offset to lower trade volume with the EU.”

“The UK has historically enjoyed a position as a global financial center; if the UK works hard to maintain strong global trading relationships and achieves a reasonable basis on which to be able to conduct business with European entities, the UK financial sector may not be too badly undermined.”