Breaking Up is Hard to Do
A year ago, it seemed likely that debt-ridden Greece would be the first country to exit the 28-country European Union (EU). However, that distinction now looks likely to go to the United Kingdom (UK). In the British leave/remain referendum held on June 23rd, voters decided that Britain should leave the EU, marking the beginning of what is being referred to as “Brexit.” The UK’s withdrawal from the political and economic union is unprecedented, and there is no clear path to the exit as the EU does not have comprehensive terms of departure. This likely means that the UK will remain a member of the EU, subject to all its regulations and budget requirements until it can negotiate a formal separation agreement. Given the complexity of the negotiations, we believe reaching a deal will be a lengthy process — potentially years rather than months.
Until the terms of the separation agreement are known, it will be difficult to predict the full economic and fiscal effects of Brexit. However, we do expect gross domestic product (GDP) in the UK to weaken amid lower business investment and exports and, potentially, the consequences of Brexit could push the UK into a recession.
Please click below to watch the Breaking Insight Video:
Britain voted to leave the EU, marking the beginning of what is being referred to as “Brexit”. Bruce Cooper, Chief Investment Officer at TD Asset Management, talks to Kim Parlee about how the markets are responding to the unprecedented vote.
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