As you will have seen upon waking this morning, or maybe you have been up all night and are waiting to go to bed. The United Kingdom electorate has voted to leave the European Union.
It is reasonable to suggest that whilst the margin of the result was close (51.9% Leave) the predictions were that we would maintain our membership of the EU as opposed to leaving.
The people of the United Kingdom have spoken and as such a chain of events to leave the EU has been set into motion, which at the very least will change the terms of our dealings with it.
The government have their work cut out. David Cameron has announced his departure by October and his successor will have to invoke Article 50 of the Lisbon Treaty and negotiate the terms of the withdrawal. This will include trade deals, regulation around movement of both goods and people; potential repatriation from within and back to the EU, the list goes on.
In effect what will remain and what will change in a relationship that has existed for over 40 years.
The return of Scottish Independence?
Northern Ireland and Scotland voted predominantly to remain in the European Union. This may be a start for some discussions about the devolution or separation of some areas of the United Kingdom. This decision may well lead to discussions for other members of the European Union to leave or remain.
The Bank of England (BoE) in the form of the governor Mark Carney has responded rapidly to ease fears of the potential for economic difficulties confirming that £250 billion will be made available to the UK banks and liquidity available for foreign currency.
More consideration and strategy will follow from the BoE. (1)
Whilst no one is able to predict exactly what will happen in the coming weeks and months, it seems safe to say that there will be volatility in markets. They will recover though; we know this from each and every shock event that has led to a sharp market downturn historically.
Please do not panic, we certainly are not.
As Neil Woodford pointed out, on February 20th 2016, the day on which David Cameron set the referendum date, the FTSE 100 index stood at 5950. As this piece is being written, the FTSE 100 stands at 6093. (2)
As Independent Financial Advisers we are positive. We are committed and spend much time and effort in researching and advising on funds where we believe the manager clearly adds value and has the ability to navigate financial markets, both good and bad.
Make decisions for the long term
Whilst as a consumer and investor you may well be worried about the short term implications of this outcome, our belief and that of many of the leading fund managers, financial services experts and financial companies consider that opportunity is there in the markets for investors.
Independent Financial Advisers should always focus on and advise consumers to invest for the longer term, that should not change, nor does this event to leave, alter that remit. There are always considerations to alter the strategy of investment because of events that affect markets. This is why advice and understanding precedes informed decision-making.
Markets both domestic and global have reacted to the leave decision and are shocked. This is not predominantly a negative or as negative as the markets initial reaction implies (2).
The considerations of a potential Leave vote we, and lots of other experts have considered the economic reaction in advance. A 40 page independent report commissioned by Neil Woodford concludes that the long term economic future would be largely unaffected by this decision.
There will obviously be challenges in the short term caused by the turmoil, uncertainty and again this is where advice is required when making decisions.
Flexibility to adapt and change will be key so keep yourself informed.
Sources:
- Financial Reporter Online – BoE to provide £250bn of additional funds to banks – Accessed 24th June 2016
- Woodford Funds Online – Brexit Initial Thoughts – Accessed 24th June 2016
For a free, no obligation initial chat about your individual finances, call us on 0800 0112825, e-mail [email protected] or take a look at our website www.wwfp.net.
Last modified: June 24, 2016
