Whether you regard today as a ‘new dawn’ or a ‘national tragedy’ short-term economic uncertainty is on the cards for us all. This is perhaps today’s only certainty. How effectively the UK can manage this uncertainty and then capitalise on the opportunities of life outside the EU will be crucial for future growth.
In the short-term it will be the verdict of the financial and stock markets which will matter most for businesses shaping currency fluctuations and potentially interest rates. Overnight we have seen Sterling falling – good for exporters in the short term but making imports more expensive. Investment into the UK is likely to be curtailed too in the short-term as international companies re-evaluate their options.
Political uncertainties across Europe are also key to stability. The potential for domino effects from the UK vote have been widely discussed with the potential to further undermine European stability. Slightly further ahead are possible impacts on the French and German elections in 2017.
Longer term future growth depends crucially on the trading and collaboration arrangements we can make with Europe and other countries. So far comments from European capitals appear conciliatory – there is a willingness to talk. So perhaps a Norwegian type agreement is possible. If it is and we can find some mutual agreement on issues around border security and migration the UK and Europe may remain as good trading neighbours.
Domestically, Brexit offers a UK government more policy freedom. Government could favour UK companies in public procurement – a buy British policy. It could adopt a more interventionist policy to support UK business without the constraints of EU state-aids rules. It could ease labour market and other regulation. Long term, how willing or able a UK government is to take advantage of these opportunities will depend on its political complexion and policy stance.
Please noted that the views expressed in this blog belong to the individual blogger and do not represent the official view of the Enterprise Research Centre, its Funders or Advisory Group.