So Brexit has pretty much scared everyone involved with finance already. People are acting as if the world is coming to an end, but are they just being hysterical? The answer is that no one knows. No one knows for sure what the eventual outcomes of Brexit will be. Most of them won’t have anything to do with the markets, or with economics at all. Brexit may be the most monumental event in our lifetimes, reaching all across the world. There are a number of possible effects of Brexit, most of which could happen at the same time. Here are the ten most likely of those effects.
The Japanese Economy May Benefit
From my limited knowledge of foreign exchange trading, whenever main currencies like the dollar or the pound is in trouble, people exchange their currency for the Japanese yen. This is because the yen has traditionally been considered a safe currency. In the last few days, the British pound has been sharply dropping in value. I can’t imagine the Japanese yen won’t benefit greatly from this. And it will boost the Japanese economy, perhaps giving it’s stock market the advantage it’s been lacking for several years now.
Sanctions Against Russia Might Be Lifted
After Russia annexed the Crimea a few years ago, western countries imposed brutal sanctions on her. Sanctions are the only action that realistically could have been taken. They have had the effect of weakening the Russian economy, but they have also hindered the European economies as they can’t trade with the Russians. Until now, European countries have been able to take the hit just as long as Russia was punished. But the effect Brexit may have on the British economy might force European countries to lift the sanctions against Russia. When people said Vladimir Putin would benefit from Britain leaving the EU, maybe they were right.
The Unification Of Ireland
Northern-Ireland is, of course, still part of the United Kingdom. But there are many within the country who dream of an eventual reunification with the republic of Ireland. The Northern-Irish population tend to want to stay part of the UK, but Brexit might change that. Because 55 percent of Northern-Ireland voted for us to stay in the EU, Irish republicans have used the result as a political tool to call for the unification of Northern-Ireland with the republic of Ireland. Right now it doesn’t seem to be a likely outcome, but you never know what might change in the near future.
Scottish Independence
A large portion of the Scottish people have long wanted independence from Great Britain. Two years ago, the people of Scotland voted in favor of remaining in the union. But in the Brexit referendum, Scotland voted in favor of remaining in the EU. Overall, Great Britain voted to leave. This means that Scotland will be taken out of the EU against her will, unless something radical happens before Brexit actually takes place. The leader of Scotland has made it clear that she wants another independence referendum before the UK leaves the EU. Current polls show a big majority of Scottish people support the idea of an independent Scotland right now. So the idea of Scottish independence may well soon become a reality.
Unification Of Gibraltar
Gibraltar is a small British territory bordering Spain. It’s been under British control for several hundred years, but it’s ownership has now been called into question. The Spanish government has always wanted to regain control of Gibraltar, but now they have an excuse. Gibraltar voted to remain a member of the EU. Shortly after the results became known, the Spanish government demanded joint-sovereignty of Gibraltar. This has sparked fears that Spain will actually invade the territory, causing the British navy to increase their presence in Gibraltar.
HSBC Might Move To France
HSBC, or the Hongkong and Shanghai Banking Corporation, is one of the world’s biggest banks. It has long been based in London, but their future location is currently unclear. They are preparing to move a thousand jobs from London to Paris, which makes some people think they are planning on moving their whole organization to France. That would be a big loss for Britain, as London would no longer be the financial hub of Europe. Seventy thousand jobs could be moved away from the UK, which would obviously devastate the British economy. HSBC has clearly warned that they might move to France if the UK doesn’t stay within the European single market.
The Collapse Of The Labour Party
The Labour Party is one of two major parties in the UK. They are the opposition to the government, so they should be taking advantage of the Prime minister’s resignation right now. However, they are dealing with their own leadership challenge. Almost half of the labour shadow cabinet resigned yesterday, which puts the party on the brink of a civil war. It seems likely to me that the party is about to split into two different parties. I don’t think either would be able to win a general election. The labour party might be about to completely collapse.
The EU Might Collapse
The UK is the second biggest economy in the EU, so it’s a big loss for the union. This won’t help their chances of survival, but the real threat to the EU is the possibility of other member states leaving. There are many other countries where support for the union is on the decline. Political figures within these countries are calling for their own referendum on EU membership. There are some countries, like Greece, which would surely leave the union if given the chance. The greatest fear for EU supporters is a domino effect after Brexit. The Polish government has stated that the EU would be a lot weaker without Britain, so maybe they’ll be the first to leave.
Collapse Of The British Economy
With a change to our political system this big, you never know how the economy will adjust. The pound has sharply dropped in value and British banks have lost a lot of their worth. The financial sector is going mental. With a change this big, it could actually result in the absolute collapse of the British economy. It’s an unlikely result but it could happen. No one knows what happens after an EU member leaves the union, we’re in the process of finding out. Real estate stock prices have swiftly fallen this morning, which is a bad thing, especially considering much of the British economy is based on our booming property markets.
The British Economy Might Become Stronger
In the long run, the economy may grow faster than ever. The argument of the leave camp was always that EU membership was slowing the British economy due to all the bureaucracy. They point out that neither Norway or Switzerland are EU members, with their economies being among the strongest and fastest growing in the world. Without our EU membership, we’ll be able to have our own trade deals with other countries on our own terms. That might not be enough to save the economy from the hit it’s currently taking, but you never know. Brexit may be good for us in the end.