The potential impacts of UK Referendum to leave European Union

June 24th, 2016 - By Fabio Mittelstaedt

Needless to say that BREXIT is not a simple, political and economic movement, as it is the first time that a large affiliated geography decided to exit European union.

But the exit is not something so immediate, it may take up to two years to show full effects.

Anyway this morning in the day one after the referendum, we could expect changes in the confidence of all British and Ireland Big Corporations, especially Banks. Stock markets will also have a short term effect. Mortgage market may live difficult moments with some devaluation of properties and anyone with savings may think about creative ways to hedge and secure its investments.

In the medium term we may see inflation and interest rates arising, the pond already devaluated this monday (June 27th) and some uncertainty will drive the foreign direct investment to decline as definitely the exit of EU will restrict the flexibility to move money and business across other regions in Europe and even in the world. 

According to the Brazilian Newspaper Valor Econ?mico "several large banks, including HSBC, JPMorgan Chase & Goldman Sachs have already begun preparations for a possible change of some operations to Dublin, Paris and Frankfurt". It means that Financial Services Corporations that have Global or Massive Presence in EU may be afraid of potential political and economical retaliations in the coming months and may think about new geo strategies to survive and retain the value of its current operations.

The easiness for people from other nations that intend to visit or work in UK may be stable in the short term, but definitely there trend is that new rules will be created soon meaning a more restrict and rigid process.

It does not mean that UK will be closed in a glass bubble, but for some time investors will have a conservative way to see UK as a genuine growth engine in Europe. This will probably affect as well the trade balance, previous and future trade agreements in the past facilitated by EU entity and negotiation forums. Tension about commercial partnerships among UK and other Countries like USA, China and key European Countries like France and Germany, have the power to create a huge instability in the global economy. There are even rumors that the lack of satisfaction with the EU system in France can make it the next candidate to challenge the status quo in Europe. The table below shows UK's monthly trade with its main partners, and you will notice that the top Countries both for exports and imports are exactly the ones that I mentioned before, adding Netherlands and Belgium also.

It may not be the end of an era of coalition  and economic collaboration, but maybe it is the start of the question if the level of inter –European collaboration was enough, in all levels, from political decisions to open innovation, from social economic threats to defining a new way to keep a dominant position in the new capitalist scenario where startups challenge stablished corporations and ideas of young entrepreneurs from all over the world may change the game of how a nation create competitive advantage nowadays.

In a tough economic moment when the world in trying to propagate and expand the idea of open innovation, not just among corporations but among nations, the decision of UK to leave EU is at least a sign that Europe need to reengineer its business model to face competition in US and Asia and also emerging markets.

More than never UK must keep in mind that with this relative freedom from EU regulations a new way to do business and create liaisons with other countries must be created, and this is something that may take from years to decades, impacting the current chain of partners as Brazil and others outside European Union.

Is it the creation of a new Berlin wall when most people thought that the internationalization of technology was breaking all barriers among nations, citizens and consumers dreaming about a open global world?