Brexit

By Stephen McPhie, CA
Partner, RSD Solutions Inc.

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We’ve been overdosing on elections and referenda in the UK recently.  In 2014 there was the Scottish independence referendum, 2015 saw the UK parliamentary elections, the Scottish election took place last month and next month comes the EU referendum (the Brexit vote).

Recent results in Scotland turned historic voting patterns upside down, a sign of voters’ discontent with the established order; echoes perhaps of the mood in the current U.S. presidential election campaign.  Canada saw unexpected results in recent Federal and Alberta elections.

The quality of the Brexit debate has been extremely high and informative [Ed.: insert own words here], as illustrated by David Cameron on the remain side suggesting a vote to leave could bring on war across Europe and Boris Johnson for the leave campaign likening the behaviour of the European Union to that of Hitler.

In spite of a no result in the Scottish independence referendum, the issue is kept very much alive with arguments similar to those that dominated Quebec for so many years.  Even in the event of a vote to remain in the EU, this is likely also to be the case with that issue.

Opinion polls, for what they are worth, for the Brexit vote had both sides very close, but have been moving recently towards a vote to remain.  So what happens if we wake up on June 24 to find that the UK voted leave?  My expectation would be for Sterling to fall significantly followed by a period of significant volatility.  Such volatility is likely before the vote as well if polls are close.  Businesses appear to have been delaying investment decisions for some time already, and this would likely continue following a vote to leave.  However, nothing would happen overnight.  Treaties provide a 2 year negotiating period.  This might be optimistic considering that when Greenland withdrew in the early 1980’s negotiations lasted around 3 years and the main negotiation was about fishing.  Any negotiation for the UK would be of a completely different level of complexity.

So if you have any dealings with the UK or any other EU country, fasten your seat belts and figure out how you are planning to deal with risks that Brexit poses … preferably do this a few months ago!