Brexit 2 Years On & None The Wiser
Hellen Dalton
Hellen Dalton
Senior Investment Manager

The UK shocked the world in June 2016 when it voted by 52% to leave the EU. The result proved to be a harbinger of populist revolts we would see in the US with the election of Trump, election scares in Austria and France and the latest fallout following the Italian election and the efforts of two populist parties to form a coalition government.

David Cameron, as PM and leader of the Tory party, had campaigned with the promise of a referendum on EU membership in 2015. He had hoped to put the issue to rest once and for all. Instead following the result he had to fall on his sword, leading the way for Theresa May’s leadership.

It has been a rocky road since then. May has walked a tightrope since the 2017 snap election, called in an effort to consolidate her position within her party and strengthen her Brexit negotiating hand in Brussels. Instead it reduced the Tory’s majority in Parliament and May was forced into a deal with the DUP, led by Arlene Foster, which holds 6 seats in Westminster. The DUP campaigned for Brexit, while 56% of Northern Ireland voted to remain in the EU.

The opposition Labour party led by Jeremy Corbyn, has said that it is bowing to the will of the people and has agreed to go along with Brexit plans. This has effectively left the Liberal Democrats as the only “Remainer” voice in parliament. Unfortunately for Remainers looking for someone in Westminster to fight their corner, the Lib Dems were decimated in the 2015 election for the crime of forming a coalition party with David Camron’s Tory party in 2010. They are showing approximately 8% in the latest polls. In the meantime, at a point when most opposition parties, sensing a weakened leadership would go for the jugular, Corbyn’s Labour party lurches further left.

The political landscape in the UK has left many in Brussels scratching their heads as they try to understand exactly how the UK plans to leave the EU and what the UK wants from the ongoing negotiations. This month May is hoping to force the hand of her divided cabinet, pushing for a vote on the kind of customs union the government should pursue. This is another high risk gamble by May amid growing calls for her resignation and grumbling within her own party.

Where does this leave Ireland?
There is no doubt that Ireland will be directly impacted when the UK leaves the EU. The question is how badly. It is worth bearing in mind that while the UK is our major trading partner, trade with the combined EU block far outstrips that, and continues to grow (up 14% between 2016 and 2017). Uncertainties will remain for the foreseeable future, so companies are taking matters into their own hands expanding existing EU markets and looking further afield. At the same time British and international companies are expanding their foothold in Ireland, with Financial Services a particular beneficiary.

While politicians continue to play down the risks at home, the government is pushing Brussels for no border in Ireland and to keep customs ties with the UK. All of the main Irish parties are singing from the same hymn sheet which has helped our case and has meant that the main players in the EU appear to have our interests in mind, for the moment.

Brexit will continue to prove a messy affair with unintended twists and further political scalps. It will also drag on for far longer than anyone would wish.

At this point markets would settle for clarity.

In the graph below, sharp moves in sterling reflect how markets view UK risk.

Source: Factset 24/05/18

Brexit In Numbers
Number of Votes 33.6m
Turnout 72.2%
EUR/GBP Rate On 26/06/16 0.76
Lowest Rate Reached (as of 29/08/17) 0.93
Current "Divorce Bill" Estimate £39bn
The UK In Numbers
GDP 2018 Estimate 1.2%
Inflation CPI (as of 03/18) 2.5%
Bank of England Base Rate (as of 05/18) 0.5%
Unemployment (as of 03/18) 4.3%


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