REPORT
By Gökhan Kurtaran
London letter, week beginning Feb. 29

London letter, week beginning Feb. 29

Clouds of Brexit might storm over U.K. economy; decade of uncertainty?

G-20 summit

The G-20 summit in China has not produced any solid result in respect of spurring global growth while U.S. data last week reignited speculation that yet another rate hike could be in the offing stateside.

Brexit

Brexit fears are still weighing in on markets despite the diminished effects from shock waves of London Mayor Boris Johnson’s announcements of backing the EU exit campaign at the EU referendum on June 23 this year.

U.K. Prime Minister David Cameron also fueled his campaign with G-20 finance ministers’ joint support for the U.K. to stay within the EU at the weekend.

Chancellor George Osborne has persuaded the group of 20 leading economies to warn about the risks that the global economy would face if the U.K. leaves the EU.

“Downside risks and vulnerabilities have risen, against the backdrop of volatile capital flows, a large drop in commodity prices, escalated geopolitical tensions, the shock of a potential U.K. exit from the European Union and a large and increasing number of refugees in some regions,” the final communiqué from the G20 meeting in Shanghai said.

Moreover a Brexit would lead to a ‘decade of uncertainty’ because of the time it would take for Britain to negotiate new trading relationships, quotes an official government paper, according to Financial Times.

“For the next four months we get to enjoy this great debate on whether Britain should remain in a reformed EU or simply go it alone. When it comes to certainty, the status quo is always seen as the safer option. Market moves will be at the mercy of the various Brexit polls for the coming months, and despite the fact that we should have learned by now that they’re fairly useless, the markets won’t necessarily adopt that logic.”

 

 

 

01 Mar,2016

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