On Thursday 23 June, Britain voted out of the European Union winning by 52% to 48%. The referendum turnout was 71.8% with more than 30million people voting and it became the highest voter turnout in a UK-wide vote since the 1992 general election. The results were shocking leaving the whole world shaken up with most people not even sure what it meant but still shaken. But since it already happened, it’s time we start dwelling on what next and what it means to the global business. The future is blurred with Davis Cameron stepping down as the Prime Minister; the ball will be in his successor’s court to tackle all the Brexit quagmire and help calm the citizens’ uncertainty. How will this effect your business? Click here to read the full blog post. https://www.laowaicareer.com/blog/brexit-will-effect-your-business-heres-everything-you-need-to-know/
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Will Brexit effect your business? Here's everything you need to know!
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2. The sinking of the sterling pound
The most helpful tool for economic ball-gazers is
the value of the sterling. Most of them predict that
the value of the pound will significantly drop even
up to 30%. Shortly after it emerged that Britain
was leaving the EU, it dropped by 10% to the
lowest it has ever been since 1985. The value of
the pound has significantly decreased especially in
the Asian countries up to almost 9% and 3%
against the Japanese Yen. This is likely to mean
that:
3. Shoppers
The imports will become more expensive resulting into
hiked prices on the High Streets which will be such a
blow for shoppers. In 2015, the UK imported more than
$623 billion of services and goods which mainly came
from the United States, Germany, France, the
Netherlands and China. The most affected will be
clothing and electronics which are majorly imported
from overseas. The effect might not be felt immediately
but later in the year. Also, supermarket prices are most
likely to rise and motorists are also going to feel the
pinch since the price of petrol and diesel will rise more
quickly.
4. Holidaymakers
Foreign holidays will be more expensive since
your pounds will now buy you fewer dollars or
Euros. The cost of accommodation will,
therefore, be higher compared to when the
pound was still highly valued. On the other
hand, Britain’s domestic tourism industry will
possibly experience a boost from the weaker
pound with most people preferring to enjoy
the holidays in the UK since it will be cheaper.
5. British expatriates
Most British expats have Ireland, France,
and Spain as their destination of choice. It
will be such a blow especially for those
receiving the salaries or pensions in
Sterling hence their purchasing power will
drop in their resident countries.
6. Businesses
The exporters may be winning on this since
their products will be cheaper for the foreign
market hence highly competitive, something
that importers might not have the opportunity
of enjoying since buying from outside will be
more expensive.
7. Trade
The falling of the sterling pound might be beneficial too
since the exports will be much cheaper and definitely
get a boost. At the moment, the UK companies are
enjoying the opportunity of trading with EU on quota
free and tariff-free basis but after Brexit, that might not
be the case. On the other hand, India might have easier
trade with Britain but quite difficult with the rest of the
European Union. India has the UK as its central hub for
business to reach out to the rest of the world with
almost 33% of the investments being in IT and telecom
sectors.
8. Manufacturing and automobile Industries
Rolls-Royce, for instance, was quite skeptical about
the UK leaving the EU and warned its employers
that they would risk so much money planned for
the testing plant and that will place their main rival
the US at a competitive advantage. This is mostly
because motor industries are interconnected
throughout Europe and with Brexit, it will be a
period of uncertainty, something most of these
companies cannot afford.
9. Investment and savings
For savers, any rise in interest rates will be good
news. Unfortunately, during the Brexit campaign,
the Treasury argued that the UK shares would be
less attractive to foreign investors and completely
decline in value. Although still uncertain, in the
long-term, the big exporters might benefit from
the weakening pound making the value of their
shares rise. The importers, on the other hand,
might feel the shrinking of their profits. This
analysis is based on the fact that shares rise with
the company’s profits.
10. The Impact on the Global Economy
All this trickles down to how the global
economic plans will be shaken. Britain
accounts for about 18% of the European Union
GDP. With Brexit, the EU block could lose as
much as 1/6 of its cumulative economic
output. Brexit is a real test, and the world
should use it as a case study and efficiently
deal with the economic backlash.
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