Wednesday, 29 June 2016

Britain votes to exit European Union (BrExit)

The historic and unexpected voting by Britons to exit EU is probably the effect of getting tired of globalization, which only benefited rich & famous, industrialists and businesses to expand their empires at the expense of labour class.The voter turnout was 72%, the highest in any British vote in the past few decades. The outcome of the referendum shows that Britons were very angry with open borders facilitating inflow of immigrants.

Brexit Impact on UK:
  1. Brexit could be the beginning of disintegration of EU.
  2. Britain, world's 5th biggest market can't be ignored, and EU countries will have to negotiate bilateral trade agreements.
  3. "EU exports  to UK" are much less than the "UK exports to EU" hence could attract retaliatory tariffs on UK exports to EU.
  4. British pound cheaper by 30-35% after referendum, holidays and shopping in UK cheaper now.
  5. UK will face investment withdrawals and economy spirals down leading to higher unemployment.
  6. Lower immigration likely to hurt UK economic growth.
  7. UK will experience higher taxes and less spending.
  8. Imports getting expensive impacts consumption.
Brexit impact on India:
  1. In short term, India gets adversely effected like other parts of the world.
  2. Indian companies head quartered in EU & UK will get adversely impacted.
  3. Indian Rupee gets weakened.
  4. Consumer inflation likely to go up.
  5. Risk aversion across all asset classes.
  6. FPI (Foreign Portfolio Investors) outflows might get accelerated.
  7. Uncertainty provides opportunity for stock-picking but is risky.
  8. Indian students applying to UK universities and colleges might reduce further. 

It is still not clear if Brexit will really happen. And even if it happens, no one is exactly sure how things will play out. The impact on the UK economy is still not clear, ensuring that claims about the ripple effects on India and other economies are not quite concrete yet.

No comments:

Post a Comment