What now after Brexit?

Having spent the past few weeks in UK & Asia friends, colleagues, staff and peers have been curious to understand what the sentiment is after the UK took to the polls a week ago. I am not an economist, nor do I have a crystal ball! I do however like most people have an opinion and as the polls seem to suggest in Australia the likelihood of a hung parliament and Trump continues to gain ground in the US we could have an entirely different landscape to survey in the coming months. So what now for the UK?

Firstly no one no matter what they say really knows what happens next, we are in uncharted territories, economists, brokers business leaders can only guess at what the short or long-term economic consequences are or indeed what the unintended consequences will be. We seem to regularly be getting it wrong these days. Whilst the sentiment outwardly in the city was highly sure a 'remain' vote would prevail the country proved them wrong. An exit win was always going to result in mayhem and market volatility. Over the past week the world economy has continued to function, as has the European economy and the UK economy. Yes there is with a degree of extra uncertainty but the markets have been uncertain for as far back as I can remember.

Whichever way you voted you would have to acknowledge that there were some clear positive and negatives to either side of the debate, which is why the overall vote was so close. Those of us that voted to stay have to accept that there are actually some advantages to the UK leaving the EU; from an economic perspective, to form an overall judgment, we need to know what trade deals the UK will establish with its major trading partners as it withdraws from the EU. The reality is that we won't know the answer to this for years. But if the UK can negotiate good terms with the EU on the way out then commercial implications may be limited. And the fall in Sterling is an overall net positive for UK exporters.

The markets, public and press often over react when faced with uncertainty and events such as this, there will be businesses and industries that are able to take advantage People whose views I rate, suggest doing very little and letting the noise settle down.

The consequences of Brexit for the Consumer sector are interesting with regards to access to the UK’s biggest export market, potential tariff costs and implications there of and redeployment of service sector capital, resource and spending power away from the UK will depend on how and what agreements are negotiated. In the short there is no certainty.

Markets, investors and consumers do not like uncertainty. There are now a number of areas of uncertainty: When will whoever replaces Cameron trigger Article 50 and start the theoretical two-year countdown? Who will replace him? Will we actually end up leaving? Will Europe come to the table with a deal? How long will negotiations take (presumably a lot longer than two years given the complexity of leaving and what will the outcome be? Will the EU agree favorable trade deals given the importance of the UK or treat the UK harshly to deter other territories triggering a referendum?) Will Scotland and Ireland move to leave as well? Which exit model will the UK work towards, as none of the existing models would appear to fit comfortably?

With this in mind you would expect to see the pound weaken somewhat and we could face a   drop in consumer confidence. So what is likely to be affected? Everything is the answer. So what for the staffing sector? It was interesting to note that the FTSE 100 recovered well after taking an initial hit, however the FTSE 200 and Aim do not bounce back as well. Recruitment, human capital and support services took a hammering, mostly on no volume. This is partly due to the exposure some of these businesses have to main land Europe and also because support services is broad by industry exposure, mainly UK focused but with some international or entirely overseas players. The impact of Brexit will, therefore, be varied and largely company specific.

Niche and highly specialised sectors offer some level of protection and businesses with high exposure to APAC will again be more secure in the short term. One of the key issues will be around blue-collar temporary labor within the UK becoming scarcer or more expensive. However any businesses running contracting models should be basing the USP on the skill sets they supply and the flexibility of contractors not the cost. We could actually see an increase in the demand for temporary workers and a reduction of firms hiring permanent head count whilst we go through this period of uncertainty. The digital, technology and on line sectors should see very little volatility in the short term. The general sentiment of people I speak too and that of my own is to “keep calm and carry on”. What has happened has happened there is no need to create a doomsday scenario that may potentially never come.