Markets, Businesses In Turmoil Following Brexit Vote

The UK’s vote to leave the European Union last week—known casually as “Brexit”—threw financial markets into turmoil and sparked questions about the future of Great Britain and the European Union. While the country’s exit from the EU is at least two years away, stocks have dropped, bond prices have risen and the value of the British pound has plummeted as markets face the unprecedented situation.

With the terms and timetable of the UK’s exit and new trade agreements still unknown, Brexit’s long-term impact on promotional products industry companies is unclear. In the near-term, the devalued pound could make exports from the UK more attractive.

“The companies most impacted by the referendum’s fallout are the ones buying in dollars and selling in pounds,” says Martin Varley, CEO of U.S.- and UK-based business services firm Customer Focus. “It’s going to cost you more. That’s a fundamental challenge for suppliers in particular. With the drop in value of the pound, everything has become 12 to 14 percent more expensive to buy. It could lead to price increases for distributors and, at some point, end users as well. However, things will ultimately calm down, and for our industry, business won’t be much different.”

Brexit’s impact on global markets was immediate and severe, wiping out more than $2 trillion in value from the S&P Global Broad Market Index within 24 hours. The markets lost a further $930 million Monday when Standard & Poor’s downgraded the UK’s AAA credit rating.

In Tuesday’s trading, European markets did show some recovery, but where they go from here is fluid and heavily dependent on the political situation in the UK and EU. Following the vote, British Prime Minister David Cameron announced that he would step down by October—he had campaigned to remain—and Jeremy Corbyn, head of the opposition Labor Party, is under pressure to resign after losing his party’s no confidence vote on his leadership. Furthermore, Scotland, which along with Northern Ireland and London voted to stay in the EU, is said to be considering a relaunch of its independence referendum.

With few references to draw upon regarding what to expect, businesses in the UK are looking to ride out the fallout. Varley says, “Our industry has already been pursuing a general drive toward efficiency. They want to do it anyway, but we have never had our phone lines busier than the last three days.”

filed under industry-news | june-2016
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