16 June 2016

8 Reasons Why BREXIT Should Not Happen !!!

Remember this date 23rd June 2016, when the United Kingdom will hold a referendum on its membership in the European Union. From an economic perspective, it is best for UK to remain in EU. Otherwise, unmitigated disaster will happen. Why?

Banks are leaving UK ???
Find out all the reasons below:

  1. Hampering Trade
    All the current trade relations with the rest of Europe will be dropped, including the Transatlantic Trade and Investment Partnership (TTIP) with the US. New negotiations were needed and the bargaining power of UK will be shrunk.

  2. Reduce Foreign Direct Investment (FDI)
    Lost of trade partnership means lost of a direct access to the EU countries, resulting a sudden drop of FDIs because investors would likely to focus on countries that have full access to the EU's single market instead of UK only.

  3. Falling pound sterling
    Slumping export and FDI would definitely hamper the UK's economy, thus making its currency lesser demand and weaker. People are less likely to use pound anymore.
    As of 16 June, pound already suffering by falling 7.27% vs Euro year-to-date.

  4. Inflation danger
    This is another effect of weakening currency, making all the imported goods and services more expensive. Inflation will spike up and will pose a danger to social unrest.

  5. Bank of England in dilemma
    Then, come to the central bank who will be facing the difficulties in juggling between slowing growth and accelerating inflation. A wrong decision made will further jeopardize the health of the whole economy.

  6. Years of uncertainties
    If Brexit occurs, under the treaty signed, there is a two-year period during which a member state can reach a withdrawal agreement. It may take longer. Meaning, it's not an immediate exit actually and economic uncertainty will persist for years.

  7. Banks moving out of London
    This is one of the major concerns in the event of Brexit, especially where London being Europe's top financial centre would suffer tremendously from the exit. Once Brexit happen, UK would most likely be treated as a "third country" and non-EU banks that currently have a branch in London would have to set up another subsidiary in EU in order to gain access to EU single market. This could prompt those banks to bypass London altogether and set up in one of EU countries instead.

  8. Unemployment
    After all, shrinking economy coupled with closing down of banks in London may result in lesser jobs in UK. Manufacturing and financial services industry will be the most affected segments.

Global financial markets already in for a volatile ride lately because of possible Brexit. Hopefully, it will back to normal with "Bremain" (British Remain in EU). Would it be the outcome?

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